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Financial constraints and cash-cash flow sensitivity

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  • Jos頌󰥺-Gracia
  • Francisco Sogorb-Mira

Abstract

This article explores the cash-cash flow relationship by comparing financially constrained and financially unconstrained companies. Unlike previous research, we test the sensitivity of cash to cash flow by considering unlisted firms as constrained and listed firms as unconstrained. Our empirical evidence is based on findings from Spanish firms and is consistent with the core rationale that unlisted firms face more difficulties than their listed counterparts when looking for funding from external markets. As a result, unlisted firms tend to hoard significant amounts of cash out of the generated cash flow, while listed firms do not. Our findings are robust to a number of additional empirical tests.

Suggested Citation

  • Jos頌󰥺-Gracia & Francisco Sogorb-Mira, 2015. "Financial constraints and cash-cash flow sensitivity," Applied Economics, Taylor & Francis Journals, vol. 47(10), pages 1037-1049, February.
    • Handle: RePEc:taf:applec:v:47:y:2015:i:10:p:1037-1049
    DOI: 10.1080/00036846.2014.987918
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    Cited by:

    1. Anton, Sorin Gabriel & Nucu, Anca Elena Afloarei, 2022. "On the role of institutional factors in shaping working capital management policies: Empirical evidence from European listed firms," Economic Systems, Elsevier, vol. 46(2).
    2. Saddiqa & Ayaz ul Haq, 2017. "Firm Characteristics and Cash-Cash Flow Sensitivity of the Manufacturing Sector of Pakistan," Business & Economic Review, Institute of Management Sciences, Peshawar, Pakistan, vol. 9(3), pages 71-103, September.

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