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Corporate investment, cash flow level and market imperfections: The case of Norway

  • Mundaca, B. Gabriela


    (Ragnar Frisch Centre of Economic Research)

We analyze firms’ investment behavior, differentiating firms according to the cash flow levels they experience during their lifecycles. We consequently consider the firm as the basic unit and not firm-year observations. Firms with persistent positive cash flow show higher investment-cash flow sensitivity than firms with persistent negative cash flow. Independent of the industry they belong to, older firms with positive cash flow show a weaker sensitivity than younger firms with positive cash flow. Firms with persistent negative cash flow are neither younger nor smaller than their counterparts, and their cash flow coefficient can be positive, negative or statistically insignificant. Thus, classifying firms by age or size may not yield a group of firms with similar financial structures.

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Paper provided by Oslo University, Department of Economics in its series Memorandum with number 03/2007.

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Length: 42 pages
Date of creation: 01 Mar 2007
Date of revision: 23 Feb 2009
Handle: RePEc:hhs:osloec:2007_003
Contact details of provider: Postal: Department of Economics, University of Oslo, P.O Box 1095 Blindern, N-0317 Oslo, Norway
Phone: 22 85 51 27
Fax: 22 85 50 35
Web page:

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