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The impact of capital market imperfections on investment-cash flow sensitivity

  • Agca, Senay
  • Mozumdar, Abon

We examine the investment-cash flow sensitivity of US manufacturing firms in relation to five factors associated with capital market imperfections - fund flows, institutional ownership, analyst following, bond ratings, and an index of antitakeover amendments. We find a steady decline in the estimated sensitivity over time. Furthermore, we find that investment-cash flow sensitivity decreases with increasing fund flows, institutional ownership, analyst following, antitakeover amendments and with the existence of a bond rating. The overall evidence suggests that investment-cash flow sensitivity decreases with factors that reduce capital market imperfections.

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Article provided by Elsevier in its journal Journal of Banking & Finance.

Volume (Year): 32 (2008)
Issue (Month): 2 (February)
Pages: 207-216

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Handle: RePEc:eee:jbfina:v:32:y:2008:i:2:p:207-216
Contact details of provider: Web page: http://www.elsevier.com/locate/jbf

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