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Liquidez y Decisiones de Inversión en Chile: Evidencia de Sociedades Anónimas

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  • Juan Pablo Medina
  • Rodrigo Valdés

Abstract

Using Chilean microeconomic data of stock-market traded firms, this paper analyzes the importance of liquidity (cash flow) in firm's investment decisions. Contrary to what the classical theory predicts -only projects profitability matters for investment decisions- and in line with modem corporate finance theory in which internal and external funds have different costs- the results show that internal liquidity is an important determinant of investment. Because cash flows could capture access to profitable projects, the paper compares estimates for groups of firms that a-priori have different information asymmetry problems. The results are in line with the idea that liquidity matters for investment decisions.

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Bibliographic Info

Paper provided by Central Bank of Chile in its series Working Papers Central Bank of Chile with number 25.

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Date of creation: Apr 1998
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Handle: RePEc:chb:bcchwp:25

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