Do investment-cash flow sensitivities provide useful measures of financing constraints-英文文献.pdfVIP

DO INVESTMENT-CASH FLOW SENSITIVITIES PROVIDE USEFUL MEASURES OF FINANCING CONSTRAINTS?* TEVEN . AP LAN AND UIGI INGAL ES S N K L Z No. This paper investigates the relationship between nancing constraints and investment-cash ow sensitivities by analyzing the rms identied by Faz- zari, Hubbard, and Petersen as having unusually high investment-cash ow sen- sitivities. We nd that rms that appear less nancially constrained exhibit signicantly greater sensitivities than rms that appear more nancially con- strained. We nd this pattern for the entire sample period, subperiods, and indi- vidual years . These results (and simple theoretical arguments) suggest that higher sensitivities cannot be interpreted as evidence that rms are more nan- cially constrained. These ndings call into question the interpretation of most previous research that uses this methodology. “Our nancial position is sound . . . Most of the company’s fund s are generated by operations and these fund s gre w at an average annual rate of 29 % [over the pas t 3 years]. Throughout the company’s history this self- nancing concept has not been a constraint on the com- pany ’s growth . With recent growt h restrained by depressed economic conditions, the company’s net cash positio n has grow n substantially” [Hewlett-Packard 1982 Annua l Report]. A large nance and macroeconomics literature studies the relation between corporate investment and cash ow to test for the presence and importance of nancing constraints. Beginning with “Financing Constraints and Corporate Investment” by Faz- zari, Hubbard, and Petersen [1988], (hereinafter FHP [1988]), these studies divide a sample of rms according to an a priori measure of nancing constraints and