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Investment Cash Flow Sensitivity and Effect of Managers' Ownership: Difference between Central Owned and Private Owned Companies in China

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  • Yuanyao Ding

    (Department of Economics, Business School of Ningbo University Ningbo 315211, China)

  • Xu Qian

    (Department of Finance, Business School of Ningbo University Ningbo 315211, China)

Abstract

Based on panel data of the listed companies in China's stock market A during a period of year 2007 - 2010, we made an empirical study on what drives the investment cash flow sensitivity and theeffect of management's ownership and boththeir differences between the central stateowned companiesand then on-stateowned companiesas well.The sensitivity of investment to internal cash flow in China'scentralstate-owned companies can be explained by hypothesis of free cash flow It is the cost of agency that causes over-investment behaviors ,and the management's ownership appears significant enhancement effect rather thanentrenchment effect. However,the sensitivity of investment to internal cash flow in China's non-state owned companies supports the explanation of hypothesis of financial constraints .A symmetrical information causesunder- investment behaviors of the firms.In the mean while,the entrenchment effect of manages' ownership dominates the enhancement effect in non-state owned companies

Suggested Citation

  • Yuanyao Ding & Xu Qian, 2014. "Investment Cash Flow Sensitivity and Effect of Managers' Ownership: Difference between Central Owned and Private Owned Companies in China," International Journal of Economics and Financial Issues, Econjournals, vol. 4(3), pages 449-456.
    • Handle: RePEc:eco:journ1:2014-03-1
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    Cited by:

    1. Moez EL Gaied, 2018. "Investment-Cash Flow Sensitivity and Growth Opportunities," International Journal of Economics and Financial Issues, Econjournals, vol. 8(2), pages 154-160.
    2. Georgeta Vintila & tefan Cristian Gherghina, 2015. "Does Ownership Structure Influence Firm Value? An Empirical Research towards the Bucharest Stock Exchange Listed Companies," International Journal of Economics and Financial Issues, Econjournals, vol. 5(2), pages 501-514.

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    More about this item

    Keywords

    Internal Cash Flow; External FinancialConstraints; Entrenchment Effect.;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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