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The effects of cash flow and size on the investment decisions of ICT firms: A dynamic approach


  • Aoun, Dany
  • Hwang, Junseok


This paper examines one of the fastest growing industries in our world today, the ICT industry. We assess the sensitivity of a firm's investment to a set of financial determinants, by developing a flexible adjustment dynamic model. In particular, we examine the degree to which a firm's liquidity influences firm investment and whether firm size and firm specialization have any additional implications. Moreover, the effect of the dot-com burst is also considered. For a panel of ICT and non-ICT US companies listed on the NASDAQ stock exchange, the results reveal the following: (1) all firms are sensitive to the availability of internal funds; (2) investment intensity decreases with firm size; (3) and leverage negatively affects investment for ICT firms.

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  • Aoun, Dany & Hwang, Junseok, 2008. "The effects of cash flow and size on the investment decisions of ICT firms: A dynamic approach," Information Economics and Policy, Elsevier, vol. 20(2), pages 120-134, June.
  • Handle: RePEc:eee:iepoli:v:20:y:2008:i:2:p:120-134

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    References listed on IDEAS

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    Cited by:

    1. Juan M. Gallego & Luis H. Gutiérrez & Sang H. Lee, 2015. "A firm-level analysis of ICT adoption in an emerging economy: evidence from the Colombian manufacturing industries," Industrial and Corporate Change, Oxford University Press, vol. 24(1), pages 191-221.
    2. repec:mth:ber888:v:7:y:2017:i:1:p:308-322 is not listed on IDEAS
    3. Strugar Ivan & Zoroja Jovana & Jaković Božidar, 2014. "Development Practices of Embedded Systems: SMEs in SEE countries," Business Systems Research, De Gruyter Open, vol. 5(1), pages 57-67, March.
    4. Pendharkar, Parag C., 2010. "Valuing interdependent multi-stage IT investments: A real options approach," European Journal of Operational Research, Elsevier, vol. 201(3), pages 847-859, March.

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