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

Rejie Georgea, Rezaul Kabir and Jing Qian
Journal Name
Journal of Multinational Financial Management
Journal Publication
others
Publication Year
2011
Journal Publications Functional Area
Strategy
Publication Date
Vol. 21(2), PP 69-88, April 2011
Abstract

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.

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

Author(s) Name: Rejie Georgea, Rezaul Kabir and Jing Qian
Journal Name: Journal of Multinational Financial Management
Volume: Vol. 21(2), PP 69-88, April 2011
Year of Publication: 2011
Abstract:

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.