Prague Economic Papers 2018, 27(5):554-572 | DOI: 10.18267/j.pep.675

Cash Flow Sensitivities of Financial Decisions: Evidence from an Emerging Market

Aysa Ipek Erdogan
Department of Tourism Administration, Bogazici University, Bebek, Istanbul, Turkey (aysa.erdogan@boun.edu.tr)

This study investigates the sensitivity of financing, investment, and distribution decisions to changes in operating cash flow, and whether these sensitivities depend on whether or not firms are financially constrained. Using a sample of 2,650 firm-years of Turkish firms for the period 1996 to 2013, we find that an increase in the short-term cash flows is associated with an increase in cash balances, irrespective of whether or not firms are financially constrained. However, unconstrained firms hold a larger cash balance than constrained firms. Dividends are positively related to the short-term cash flows of both types of firms. Investments are not sensitive to cash flow for either type of firms. An increase in their short-term cash flow induces the financially constrained firms to reduce debt financing, but makes the unconstrained firms increase their debt financing and reduce equity financing. Although firms in general prefer to use part of the saved cash in the long term, they do not deplete their cash savings. Constrained firms resort to debt financing in response to an increase in their long-term cash flow.

Klíčová slova: financial constraints, cash flow, investment, financing decisions, distribution decisions, capital structure
JEL classification: C30, G30, G31, G32, G35

Přijato: 16. duben 2018; Zveřejněno: 1. říjen 2018  Zobrazit citaci

ACS AIP APA ASA Harvard Chicago Chicago Notes IEEE ISO690 MLA NLM Turabian Vancouver
Erdogan, A.I. (2018). Cash Flow Sensitivities of Financial Decisions: Evidence from an Emerging Market. Prague Economic Papers27(5), 554-572. doi: 10.18267/j.pep.675
Stáhnout citaci

Reference

  1. Allayannis, G., Mozumdar, A. (2004). The Impact of Negative Cash Flow and Influential Observations on Investment-Cash Flow Sensitivity Estimates. Journal of Banking and Finance, 2(5), 901-930, http://doi.org/10.1016/S0378-4266(03)00114-6 Přejít k původnímu zdroji...
  2. Almeida, H., Campello, M. (2010). Financing Frictions and the Substitution between Internal and External Funds. Journal of Financial and Quantitative Analysis, 45(3), 589-622, http:// doi.org/10.1017/S0022109010000177 Přejít k původnímu zdroji...
  3. Almeida, H., Campello, M., Weisbach, M. S. (2004). The Cash Flow Sensitivity of Cash. The Journal of Finance, 59(4), 1777-1804, http://doi.org/10.1111/j.1540-6261.2004.00679.x Přejít k původnímu zdroji...
  4. Arslan, O., Florackis, C., Ozkan, A. (2006). The Role of Cash Holdings in Reducing Investment-Cash Flow Sensitivity: Evidence from a Financial Crisis Period in an Emerging Market. Emerging Markets Review, 7(4), 320-338, http://doi.org/10.1016/j.ememar.2006.09.003 Přejít k původnímu zdroji...
  5. Attig, N., Cleary, S. W., El Ghoul, S., Guedhami, O. (2014). Corporate Legitimacy and Investment-Cash Flow Sensitivity. Journal of Business Ethics, 121(2), 297-314, http://doi.org/10.1007/s10551-013-1693-3 Přejít k původnímu zdroji...
  6. Benito, A., Young, G. (2003). Hard Times of Great Expectations? Dividend Omissions and Dividend Cuts by UK Firms. Oxford Bulletin of Statistics and Economics, 65(5), 531-555, http://doi.org/10.1111/j.1468-0084.2003.00060.x Přejít k původnímu zdroji...
  7. Bhagat, S., Moyen, N., Suh, I. (2005). Investment and Internal Funds of Distressed Firms. Journal of Corporate Finance, 11(3), 449-472, http://doi.org/10.1016/j.jcorpfin.2004.09.002 Přejít k původnímu zdroji...
  8. Bond, S., Meghir, C. (1994). Dynamic Investment Models and the Firm's Financial Policy. Review of Economic Studies, 61(2), 197-222, http://doi.org/10.2307/2297978 Přejít k původnímu zdroji...
  9. Bushman, R. M., Smith, A. J., Zhang, X. F. (2011). Investment Cash Flow Sensitivities Really Reflect Related Investment Decisions. The University of North Carolina at Chapel Hill, Kenan-Flagler Business School. Working Paper, http://doi.org/10.2139/ssrn.842085 Přejít k původnímu zdroji...
  10. Buus, T. (2015). A General Free Cash Flow Theory of Capital Structure. Journal of Business Economics and Management, 16(3), 675-695, http://doi.org/10.3846/16111699.2013.770787 Přejít k původnímu zdroji...
  11. Carpenter, R. E., Guariglia, A. (2008). Cash Flow, Investment, and Investment Opportunities: New Tests Using UK Panel Data. Journal of Banking and Finance, 32(9), 1894-1906, http://doi.org/10.1016/j.jbankfin.2007.12.014 Přejít k původnímu zdroji...
  12. Chang, X., Dasgupta, S., Hilary, G. (2006). Analyst Coverage and Financing Decisions. The Journal of Finance, 61(6), 3009-3048, http://doi.org/10.1111/j.1540-6261.2006.01010.x Přejít k původnímu zdroji...
  13. Charitou, A., Vafeas, F. (1998). The Association between Operating Cash Flows and Dividend Changes: An Empirical Investigation. Journal of Business Finance and Accounting, 25(1-2), 225-249, http://doi.org/10.1111/1468-5957.00185 Přejít k původnímu zdroji...
  14. Cleary, S. (1999). The Relationship between Firm Investment and Financial Status. The Journal of Finance, 54(2), 673-692, http://doi.org/10.1111/0022-1082.00121 Přejít k původnímu zdroji...
  15. Dasgupta, S., Noe, T. H., Wang, Z. (2011). Where Did All the Dollars Do? The Effect of Cash Flows on Capital and Asset Structure. Journal of Financial and Quantitative Analysis, 46(5), 1259-1294, http://doi.org/10.1017/S0022109011000512 Přejít k původnímu zdroji...
  16. Drucker, S., Puri, M. (2005). On the Benefits of Concurrent Lending and Underwriting. The Journal of Finance, 60(6), 2762-2799, http://doi.org/10.1111/j.1540-6261.2005.00816.x Přejít k původnímu zdroji...
  17. Erickson, T., Whited, T. M. (2000). Measurement Error and the Relationship between Investment and q. Journal of Political Economy, 108(5), 1027-1057, https://doi.org/10.1086/317670 Přejít k původnímu zdroji...
  18. Fama, E. F, French, K. R. (2002). Testing Trade-Off and Pecking Order Predictions about Dividends and Debt. Review of Financial Studies, 15(1), 1-33, http://doi.org/10.1093/rfs/15.1.1 Přejít k původnímu zdroji...
  19. Fazzari, S. M., Hubbard, R. G., Petersen, B. C. (1988). Financing Constraints and Corporate Investment. Brookings Papers on Economic Activity, 1988(1), 141-195, http://doi.org/10.2307/2534426 Přejít k původnímu zdroji...
  20. Gatchev, V. A., Pulvino, T., Tarhan, V. (2010). The Interdependent and Intertemporal Nature of Financial Decisions: An Application to Cash Flow Sensitivities. The Journal of Finance, 65(2), 725-763, http://doi.org/10.1111/j.1540-6261.2009.01549.x Přejít k původnímu zdroji...
  21. Gujarati, D. N. (2004). Basic Econometrics (4th ed.). New York, N.Y.: McGraw Hill. ISBN 978-0070597938.
  22. Hair Jr., J. F., Black, W. C., Babin, B. J., Anderson, R. E. (2010). Multivariate Data Analysis (7th ed.). Upper Saddle River, N.J.: Pearson Prentice Hall. ISBN 978-0138132637
  23. Jensen, M. J. (1986). Agency Cost of Free Cash Flow, Corporate Finance, and Takeovers. American Economic Review, 76(2), 323-329, http://doi.org/10.2139/ssrn.99580 Přejít k původnímu zdroji...
  24. Jung, K., Kim, Y-C., Stulz, R. M. (1996). Timing, Investment Opportunities, Managerial Discretion, and the Security Issue Decision. Journal of Financial Economics, 42(2), 159-186, http://doi.org/ 10.1016/0304-405X(96)00881-1 Přejít k původnímu zdroji...
  25. Kaplan, S. N., Zingales, L. (1997). Do Investment-Cash Flow Sensitivities Provide Useful Measures of Financing Constraints? Quarterly Journal of Economics, 112(1), 169-215, http://doi.org/10. 1162/003355397555163 Přejít k původnímu zdroji...
  26. Karadeniz, E., Kandir, S. Y., Balcilar, M., Onal, Y. B. (2009). Determinants of Capital Structure: Evidence from Turkish Lodging Companies. International Journal of Contemporary Hospitality Management, 21(5), 594-609, http://doi.org/10.1108/09596110910967827 Přejít k původnímu zdroji...
  27. Lamont, O., Polk, C., Requejo, J. S. (2001). Financial Constraints and Stock Returns. Review of Financial Studies, 14(2), 529-554, http://doi.org/10.1093/rfs/14.2.529 Přejít k původnímu zdroji...
  28. La Rocca, M., Staglian, R., La Rocca, T., Cariola, A. (2015). Investment Cash Flow Sensitivity and Financial Constraint: A Cluster Analysis Approach. Applied Economics, 47(41), 4442-4457, http://doi.org/10.1080/00036846.2015.1030568 Přejít k původnímu zdroji...
  29. Lucas, D. J., McDonald, R. L. (1990). Equity Issues and Stock Price Dynamics. The Journal of Finance, 45(4), 1019-1043, http://doi.org/10.2307/2328713 Přejít k původnímu zdroji...
  30. Modigliani, F., Miller, M. H. (1963). Corporate Income Taxes and the Cost of Capital: A Correction. The American Economic Review, 53(3), 433-443.
  31. Myers, S. C. (1984). The Capital Structure Puzzle. The Journal of Finance, 39(3), 574-592, http://doi.org/10.1111/j.1540-6261.1984.tb03646.x Přejít k původnímu zdroji...
  32. Myers, S. C., Majluf, N. (1984). Corporate Financing and Investment Decisions when Firms Have Information that Investors Do Not Have. Journal of Financial Economics, 13(2), 187-221, http://doi.org/10.1016/0304-405X(84)90023-0 Přejít k původnímu zdroji...
  33. Opler, T., Pinkowitz, L., Stulz, R., Williamson, R. (1999). The Determinants and Implications of Corporate Cash Holdings. Journal of Financial Economics, 52(1), 3-46, http://doi.org/10.1016/S0304-405X(99)00003-3 Přejít k původnímu zdroji...
  34. Schaller, H. (1993). Asymmetric Information, Liquidity Constraints, and Canadian Investment. The Canadian Journal of Economics, 26(3), 552-574, http://doi.org/10.2307/135887 Přejít k původnímu zdroji...
  35. Uyar, A., Kuzey, C. (2014). Determinants of Corporate Cash Holdings: Evidence from the Emerging Market of Turkey. Applied Economics, 46(9), 1035-1048, http://doi.org/10.1080/00036846.2013.866203 Přejít k původnímu zdroji...
  36. Whited, T. M, Wu, G. (2006). Financial Constraints Risk. Review of Financial Studies, 19(2), 531-559, http://doi.org/10.1093/rfs/hhj012- Přejít k původnímu zdroji...

Tento článek je publikován v režimu tzv. otevřeného přístupu k vědeckým informacím (Open Access), který je distribuován pod licencí Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License (CC BY NC ND 4.0), která umožňuje nekomerční distribuci, reprodukci a změny, pokud je původní dílo řádně ocitováno. Není povolena distribuce, reprodukce nebo změna, která není v souladu s podmínkami této licence.