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Firm Financial Status and Investment Behaviour: Evidence from Manufacturing Firms in Nigeria

Author

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  • Alarudeen Aminu Isiaka Akande Raifu

    (Department of Economics, Faculty of Economics, University of Ibadan, Ibadan, Nigeria. Department of Economics, Faculty of Economics, University of Ibadan, Ibadan, Nigeria.)

Abstract

The study examines firm’s investment behaviour sensitivity to cash flow before, during and after the recent global financial crisis using the data of 28 firms listed on the Nigerian Stock Market during the period from 2001 to 2012. The contribution of the study to the existing literature rests on using financial crisis as basis for classifying firms as either financially constrained or unconstrained. Employing the panel data and instrumental variable estimation techniques, the study finds that firms’ investment behaviour sensitivity to cash flow was higher during the financial crisis than before or after the financial crisis. In other words, Nigerian firms were highly financially constrained during the last financial crisis. JEL Classification: C33, C36, G31

Suggested Citation

  • Alarudeen Aminu Isiaka Akande Raifu, 2019. "Firm Financial Status and Investment Behaviour: Evidence from Manufacturing Firms in Nigeria," Zagreb International Review of Economics and Business, Faculty of Economics and Business, University of Zagreb, vol. 22(1), pages 73-92, May.
    • Handle: RePEc:zag:zirebs:v:22:y:2019:i:1:p:73-92
    DOI: 10.2478/zireb-2019-0013
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    References listed on IDEAS

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    More about this item

    Keywords

    firms’ investment; cash flow; Tobin’s q; panel data analysis; instrumental variables;
    All these keywords.

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • C36 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Instrumental Variables (IV) Estimation
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies

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