Abstract
ABSTRACTThe purpose of this paper is to examine whether the investment-cash flow sensitivities vary with macroeconomic applying data from a sample of 84 non-financial firms listed on Saudi stock market. The results show that the ICF sensitivity is positive, and is a lot larger for more constrained firms. The evidence also shows that contractionary monetary policy, poor financial development and liquidity crisis strengthen the dependence of firms on internally generated funds when undertaking new investment projects. Taken together, the financial development effect becomes insignificant suggesting that this effect may be caused by either the monetary policy or the financial crisis.
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