Investment-Cash Flow Sensitivities are not Valid Measures of Financing Constraints
AbstractKaplan and Zingales  provide both theoretical arguments and empirical evidence that investment-cash flow sensitivities are not good indicators of financing constraints. Fazzari, Hubbard and Petersen  criticize those findings. In this note, we explain how the Fazzari et al.  criticisms are either very supportive of the claims in Kaplan and Zingales  or incorrect. We conclude with a discussion of unanswered questions.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 7659.
Date of creation: Apr 2000
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Publication status: Published as "Do Investment-Cash Flow Sensitivities Provide Useful Measuresof Financing Constraints?", Quarterly Journal of Economics, Vol. 107, no. 1(February 1997): 16-215.
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Other versions of this item:
- Steven N. Kaplan & Luigi Zingales, 2000. "Investment-Cash Flow Sensitivities Are Not Valid Measures Of Financing Constraints," The Quarterly Journal of Economics, MIT Press, vol. 115(2), pages 707-712, May.
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- James R. Hines & Richard H. Thaler, 1995. "The Flypaper Effect," Journal of Economic Perspectives, American Economic Association, vol. 9(4), pages 217-226, Fall.
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- Steven N. Kaplan & Luigi Zingales, 1995. "Do Financing Constraints Explain Why Investment is Correlated with Cash Flow?," NBER Working Papers 5267, National Bureau of Economic Research, Inc.
- Steven M. Fazzari & R. Glenn Hubbard & Bruce C. Petersen, 2000. "Investment-Cash Flow Sensitivities Are Useful: A Comment On Kaplan And Zingales," The Quarterly Journal of Economics, MIT Press, vol. 115(2), pages 695-705, May.
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