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Investment-cash flow sensitivity and financing constraints: New evidence from Indian business group firms

  • George, Rejie
  • Kabir, Rezaul
  • Qian, Jing

A controversy exists on the use of the investment-cash flow sensitivity as a measure of financing constraints of firms. We re-examine this controversy by analyzing firms affiliated to Indian business groups. We find a strong investment-cash flow sensitivity for both group-affiliated and independent firms, but no significant difference in the sensitivity between them. Additional tests consistently demonstrate that investment-cash flow sensitivity of Indian group affiliated firms is not significantly lower relative to unaffiliated firms.

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Article provided by Elsevier in its journal Journal of Multinational Financial Management.

Volume (Year): 21 (2011)
Issue (Month): 2 (April)
Pages: 69-88

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Handle: RePEc:eee:mulfin:v:21:y:2011:i:2:p:69-88
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