Investment, cash flow, and uncertainty: evidence for the Netherlands
AbstractAbstract We contribute to the debate on the interpretation of investment-cash flow sensitivities by including uncertainty measures in both a simple theoretical investment model and an empirical illustration for Dutch firm-level data. Using a slightly modified version of the Kaplan-Zingales (1997) model we show that it is likely that firms facing high uncertainty rely more on cash flow. Next we illustrate this result using an investment panel data model of Dutch listed firms. Using a threshold estimator we determine the critical level of stock price, sales, and employment uncertainty. Next we apply a GMM-estimator to correct for the endogeneity of the regressors. The empirical results confirm the notion that higher uncertainty intensifies the use of cash flow.
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Bibliographic InfoPaper provided by University of Groningen, CCSO Centre for Economic Research in its series CCSO Working Papers with number 200114.
Date of creation: 2001
Date of revision:
Other versions of this item:
- Sterken, Elmer & Lensink, Robert & Bo, Hong, 2002. "Investment, cash flow and uncertainty: evidence for the Netherlands," 10th International Conference on Panel Data, Berlin, July 5-6, 2002 A3-2, International Conferences on Panel Data.
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