Investment-cash flow sensitivity: a macroeconomic approach

The purpose of this paper is to examine whether the investment-cash flow sensitivities vary with macroeconomic applying data from a sample of 84 non-financial firms listed on Saudi stock market. The results show that the ICF sensitivity is positive, and is a lot larger for more constrained firms. Th...

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Bibliographic Details
Published in:Macroeconomics and finance in emerging market economies 2020-05, Vol.13 (2), p.115-139
Main Author: Guizani, Moncef
Format: Article
Language:English
Subjects:
Cash flow
financial constraints
financial crisis
financial development
Investment-cash flow sensitivity
Investments
Macroeconomics
Monetary policy
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Summary:The purpose of this paper is to examine whether the investment-cash flow sensitivities vary with macroeconomic applying data from a sample of 84 non-financial firms listed on Saudi stock market. The results show that the ICF sensitivity is positive, and is a lot larger for more constrained firms. The evidence also shows that contractionary monetary policy, poor financial development and liquidity crisis strengthen the dependence of firms on internally generated funds when undertaking new investment projects. Taken together, the financial development effect becomes insignificant suggesting that this effect may be caused by either the monetary policy or the financial crisis.
ISSN:1752-0843
1752-0851
DOI:10.1080/17520843.2020.1717570