Investment-cash Flow Research Articles

Cash or crash? The diversification game and corporate cash holdings in India

Purpose This paper aims to explore how corporate diversification influences corporate cash holdings (CCH) in India. It also assesses CCH behavior and its determinants during crisis, stability and recovery periods. Design/methodology/approach The study uses the system generalized method of moments (System GMM) on 1684 non-financial firms listed on the National Stock Exchange during 2002–2022. Further analyses are carried out for group-affiliated firms based on investment cash flow sensitivity, agency costs and debt capacity. Findings The findings show that firm diversification (at the group level) results in a roughly 6% fall in cash ratio, thereby implying that diversified firms (diversified business groups) hold lower cash levels than specialized firms. The reduced cash balances are attributed to the financially unconstrained nature of diversified business groups, higher debt capacity, good governance behavior and active internal markets. Additionally, the authors observe a time-varying cash policy for diversified firms, with mean cash holdings being 2% higher during crisis periods. Moreover, the findings reveal that the inverse relationship between diversified firms and CCH is less pronounced for unrelated diversified firms (2% fall in cash ratio) than related diversified firms (5% fall in cash ratio). Originality/value To the best of the authors’ knowledge, this is the first study to examine the relationship between corporate diversification and CCH in India during both crisis and non-crisis periods. The authors’ research uniquely uses System GMM on a large sample and differentiates between related and unrelated diversification.

Why Do Companies Share Buybacks? Evidence from the UK

We examine the key drivers behind management decisions on share repurchase from various theoretical perspectives, including the free cash flow theory and the signaling theory/hypothesis. Specifically, we investigate the relationship between share repurchase and three key drivers: surplus cash, undervaluation, and leverage, along with several control variables. Using a sample of UK-listed non-financial companies from 2012 to 2022, we apply logistic regression, standard OLS regression, and Tobit regression to identify the factors influencing share repurchase. Our findings reveal that firms repurchase shares to distribute cash to shareholders with surplus cash and Surplus investing cash flow. This study also finds that undervalued smaller firms with lower market-to-book ratios and lower leverage are more likely to repurchase shares. Our study highlights the key factors motivating companies’ share repurchases, such as undervaluation, surplus cash, and leverage, examined from various theoretical perspectives, including the free cash flow theory and signaling theory. Focusing on the UK context, as well as adding a new angle in regard to applying logistic regression, standard OLS regression, and Tobit regression in combination, this research contributes to the existing body of knowledge in corporate finance. The outcome of the study has plausible implications for financial managers and investors in selecting stocks. Its practical implications will help investors gain a better understanding of the factors and forces influencing share repurchase decisions.

Financial decision dynamics: Environmental, social, and governance factors and managerial choices in emerging markets

This study examines the linkage between the ESG performance of firms and managerial decision-making. It uses 8 years of ESG performance data of 110 Indian firms collected from the Thomson Reuters database. The study finds that high ESG performance mitigates a firm’s cost of debt more than equity cost. Furthermore, increases in ESG performance are associated with higher capital expenditures, lower investment cash flow sensitivity, higher cash holdings, and lesser payout of increased cash flows to shareholders. The findings are in sync with the Slack resources view, suggesting that the requirement of financial Slack for ESG-related innovations and risk-bearing is large and impacts the major managerial decisions of firms. While the effects of environmental and social performance on these decisions are similar to that of the composite ESG performance, governance performance shows an independent impact on the payout decisions of firms. The Granger Causality test reveals a bi-directional association between debt issues and ESG performance. The main results obtained from the multiple panel regressions are robust to additional tests involving lead-lag analysis. The overall findings of this study highlight the importance of ESG performance screening in the managerial decision-making process of investors who would not like to risk growth potential for a short-term increase in dividends.

Information flow and investment cash flow sensitivity

ABSTRACT In this paper, we examine whether firms with greater information flow, i.e. which reveal more firm-specific information through their idiosyncratic stock price movements, are associated with lower investment cash flow sensitivity. Using a sample of 450 French non-financial firms over the period 2006–2022, we find results consistent with the idea that greater information flow decreases information asymmetry, thus allowing firms to carry out investments more efficiently as they depend less on the availability of internal cash flows.

Pengaruh Arus Kas Operasi, Arus Kas Investasi, dan Arus Kas Pendanaan terhadap Profitabilitas dengan Ukuran Perusahaan sebagai Variabel Moderasi: Studi Kasus pada Perusahaan Subsektor Telekomunikasi yang Terdaftar di Bursa Efek Indonesia (BEI) Tahun 2023

This research aims to analyze the influence of operating cash flow, investment cash flow, and financing cash flow on profitability with firm size as a moderating variable. The sample used in this study consists of companies in the Telecommunications Subsector listed on the Indonesia Stock Exchange (IDX) in 2023. This research is a causal associative study with a quantitative approach. The data used is secondary data, obtained through documentation techniques, while the sampling technique used is purposive sampling. The analysis methods employed are descriptive analysis and Moderated Regression Analysis (MRA), where profitability is the dependent variable, operating cash flow, investment cash flow, and financing cash flow are the independent variables, and firm size is the moderating variable. The results of the study indicate that operating cash flow and financing cash flow have a significant impact on profitability, while investment cash flow does not have a significant effect on profitability. The study also shows that firm size does not moderate the influence of operating cash flow, investment cash flow, and financing cash flow on profitability.

PENGARUH ARUS KAS INVESTASI, INVENTORY TURN OVER, DAN LABA AKUNTANSI TERHADAP RETURN SAHAM PADA PERUSAHAAN FOOD AND BEVERAGE YANG TERDAFTAR DI BEI TAHUN 2017 – 2021

This study aims to determine the effect both simultaneously and partially between Investment Cash Flow, Inventory Turnover, and accounting profit on stock returns of Food and Beverage companies. This research was conducted at Food and Beverage companies in the period 2017-2021. The data used in this study is secondary data in the form of financial statements and information on company stock prices. Research data obtained from www.idx.co.id. The sampling technique used is purpose sampling, which is based on certain criteria so that 15 companies are obtained as research samples. The analysis technique used is multiple linear regression analysis. The results of this study indicate that simultaneously Investment Cash Flow, Inventory Turnover, and accounting profit affect stock returns. Partially, Investment Cash Flow, Inventory Turnover, and accounting profit affect stock returns. The higher the Investment Cash Flow, Inventory Turnover, and accounting profit, the higher the return received by investors. Conversely, the smaller the Investment Cash Flow, Inventory Turnover, and accounting profit, the smaller the return that investors will receive.

Drivers of Value Creation and the Effect of ESG Risk Rating on Investor Perceptions through Financial Metrics

This study delves deeply into the multifaceted nature of investor value creation, focusing on financial health, growth, profitability, cash flow, and ESG (environmental, social, and governance) risk ratings. The research employs partial least squares structural equation modeling (PLS-SEM) to dissect the interactions among these variables in a sample of 482 S&P 500 firms. Data were obtained from the FINRA database (2023) and Sustainalytics ESG risk ratings (2023). The results indicate that solid financial health enhances investor value creation. While growth fosters profitability, its direct impact on value creation and cash flow appears limited. The study also uncovers that ESG risk ratings negatively moderate the relationship between cash flow and value creation. This finding suggests that higher ESG risks lead to increased operational and compliance costs, which can reduce working capital and operating cash flow. Additionally, although sustainability investments may initially incur higher costs, they generate long-term value in terms of investment cash flow. A high perception of ESG risk can also raise financing costs, negatively impacting financial cash flow. These findings offer significant contributions to both academic theory and practical applications, shedding light on the complex interplay between financial and sustainability indicators in driving value creation for investors.

Geopolitical risk and investment-cash flow sensitivity: does the age of the CEO matter? Empirical evidence from emerging economy

ABSTRACT This study examines the impact of geopolitical risk on investment–cash flow sensitivity. Further, this study also investigates the moderating role of the chief executive officer’s age on the relationship between geopolitical risk and investment–cash flow sensitivity for Indian firms. Using the system-generalized method of moments technique, this study uses two-way interaction and reveals that geopolitical risk increases investment–cash flow sensitivity. Further, this study also uses three-way interaction and discloses that the chief executive officer’s age moderates the effect of geopolitical risk on investment–cash flow sensitivity. Interestingly, this study finds that older and middle-aged (younger) chief executive officers diminish (increase) the impact of geopolitical risk on investment–cash flow sensitivity. This study also shows that the effect of geopolitical risk remains consistent while incorporating alternate measurements of the dependent and independent variables.

Self‐serving attribution and managerial investment decision

AbstractThis study examines whether managerial overconfidence coupled with self‐attribution bias distorts the investment decisions of firms. To this end, we investigate the impact of overconfidence on asymmetric investment cash flow sensitivity (ICS). We find that managerial overconfidence affects ICS in a downward‐sticky direction, which is reinforced by overconfidence coupled with managerial self‐attribution. The results for both unconstrained and constrained firms are qualitatively consistent with those for the overall sample; however, the constrained subsample provides slightly weaker results. Thus, our findings indicate that managerial overconfidence and self‐attribution to recent successes may induce managers to make excessive investment commitments.

The Influence of Accounting Profits, Cash Flow Statements and Company Size on Stock Returns in Manufacturing Companies

This research aims to investigate the impact of several factors on stock returns in manufacturing companies. The research employs a quantitative associative research method and utilizes a multiple regression sampling technique. The sample consists of 15 manufacturing companies listed on the Indonesia Stock Exchange (IDX) during the period 2019-2022, totaling 60 data points from annual financial reports. The partial results of the research reveal that accounting profit and operating cash flow do not have a significant impact on stock returns. However, investment cash flow has a significant effect on stock returns, while financing cash flow and company size do not have a significant influence on stock returns. Overall, the research findings indicate that simultaneously, accounting profit, operating cash flow, investment cash flow, financing cash flow, and company size have a significant impact on stock returns in manufacturing companies. This study provides valuable insights into the factors influencing the stock performance of manufacturing companies and can serve as a guide for investors and decision-makers in managing their portfolios

FAKTOR – FAKTOR YANG MEMENGARUHI STOCK RETURN PADA PERUSAHAAN MANUFAKTUR

The purpose of this reseach is to provide knowledge that helps investors in determining companies to invest their capital in the form of shares on the Indonesian Stock Exchange. This study also uses calculations in the form of firm size, profitability, liquidity, market, operating cash flow, investing cash flow, financing cash flow, and debt policy so that investors can find out various things the company does in its development. This can be seen from the financial statements that aim to determine investors choices for the company. This research data consists of financial ratios from the financial statements of manufacturing companies for 3 years 2018 to 2020. This study discusses 8 independent variables and also uses a purposive sampling model that is used for sampling and uses 66 companies and a total of 158 company data. Researchers used five sample selection criteria and used multiple regression analysis methods. The results of this indicate that firm size has a negative effect on stock returns, while profitability, liquidity, market, operating cash flow, investing cash flow, financing cash flow and debt policy have no effect on stock returns. Abstract: The purpose of this reseach is to provide knowledge that helps investors in determining companies to invest their capital in the form of shares on the Indonesian Stock Exchange. This study also uses calculations in the form of firm size, profitability, liquidity, market, operating cash flow, investing cash flow, financing cash flow, and debt policy so that investors can find out various things the company does in its development. This can be seen from the financial statements that aim to determine investors choices for the company. This research data consists of financial ratios from the financial statements of manufacturing companies for 3 years 2018 to 2020. This study discusses 8 independent variables and also uses a purposive sampling model that is used for sampling and uses 66 companies and a total of 158 company data. Researchers used five sample selection criteria and used multiple regression analysis methods. The results of this indicate that firm size has a negative effect on stock returns, while profitability, liquidity, market, operating cash flow, investing cash flow, financing cash flow and debt policy have no effect on stock returns. Abstract: The purpose of this reseach is to provide knowledge that helps investors in determining companies to invest their capital in the form of shares on the Indonesian Stock Exchange. This study also uses calculations in the form of firm size, profitability, liquidity, market, operating cash flow, investing cash flow, financing cash flow, and debt policy so that investors can find out various things the company does in its development. This can be seen from the financial statements that aim to determine investors choices for the company. This research data consists of financial ratios from the financial statements of manufacturing companies for 3 years 2018 to 2020. This study discusses 8 independent variables and also uses a purposive sampling model that is used for sampling and uses 66 companies and a total of 158 company data. Researchers used five sample selection criteria and used multiple regression analysis methods. The results of this indicate that firm size has a negative effect on stock returns, while profitability, liquidity, market, operating cash flow, investing cash flow, financing cash flow and debt policy have no effect on stock returns.

Investing Cash Flow Volatility and Firm Stock Market Value of the Companies Quoted at the Nairobi Securities Exchange

There are a multiple number of determinants of investor perceptions about firm value which in turn influence demand for and supply of firm securities and therefore market prices and the corresponding firm market value as indicated by firm market capitalization. Extant literature reveals that it is not clear whether or not the volatility in the investing cash flows of a firm is priced information risk factor for companies listed at the Nairobi Securities Exchange (NSE). This lack of literature consensus arises from the conflicting theoretical and empirical evidence on the influence of such volatility on firm market capitalization. This study sought to establish if the annual fluctuations in cash flows from investing activities affects the market values of companies listed at the NSE. Market value was measured using the firm market capitalization ratio while the investing cash flow volatility was based on the 3-year rolling standard deviations of the investing cash flow ratios. The relevant theories that try to explain the interlinkage between investing cash flow volatility information with firm stock market valuations are the functional fixation theory; the random walk theory; the efficient market hypothesis and the MM value relevance theory. The research was undertaken as a census quantitative descriptive study based on all the 66 listed companies at the NSE. From these, 45 met the secondary data requirements resulting in 450 firm year observations for the 2011 to 2022 study period. Diagnostic tests for normality, heteroscedasticity, autocorrelation and model specification tests were undertaken. Hausman specification test provided a preference for the fixed effects model that was then used in the panel regression analysis. P-value and t-test were used in hypothesis testing at 95% confidence interval. The results of the study revealed that the volatility of the cash flows from investing activities had a negative influence on firm market valuation for the firms quoted at the Nairobi Securities Exchange. The findings support the MM value relevance theory; the Efficient Market Hypothesis and the Random Walk Theory but fail to support the Functional Fixation Theory. Since the study finds that the volatility in the cash flows from investing activities to be a priced information risk factor at the NSE, it recommends that more disclosures on information about cash flows in general and cash flows from investing activities in particular should be reported in the financial statements of listed companies in Kenya to aid investors in their investment decision making.

Understanding The Cash Flow Impact on Financial Distress among Hospitality Listed Firms Amidst the Covid-19 Pandemic: The Case of Indonesia

This study investigates the relationship between cash flow variables and financial distress among hospitality companies listed on the Indonesian stock market between 2017 and 2022. Analysis focused on Operating Cash Flow (OCF), Investment Cash Flow (ICF), and Financial Cash Flow (FCF) to discern their individual and combined impacts on financial distress.
 The findings reveal that each cash flow variable—OCF, ICF, and FCF—exerts a significant influence on financial distress when considered independently. This supports hypotheses 1, 2, and 3, signifying their substantial role in shaping the financial health of these companies. Additionally, the collective effect of these cash flow variables, as evidenced by the F-test, demonstrates a noteworthy combined impact on financial distress. In summary, this study highlights the intricate interplay between cash flow dynamics and financial distress among Indonesian-listed private companies. While each cash flow component independently affects financial stability, their cumulative influence significantly determines vulnerability to financial distress. This underscores the critical need for comprehensive cash flow management strategies to mitigate financial risks and ensure sustained financial health in these entities amidst economic uncertainties.

The Consequence Of Investment Opportunity Set In Strengthening Investment Policy On Profitability In Indonesia

This study investigates the empirical impact of investment policy components—investment cash flow, investment opportunity set (IOS), IOS strengthening investment policy, institutional ownership, and firm size—on the profitability of manufacturing companies that went public before 2015. Analyzing audited financial statements from 2015 to 2020, our results indicate that investment cash flows exhibit no significant influence on profitability. Conversely, the IOS demonstrates a positive effect, further strengthened by its interaction with investment cash flow. Institutional ownership emerges as a positive contributor, along with firm size, both positively impacting profitability. This underscores the crucial role of identifying strategic investment opportunities in enhancing corporate profitability. These findings provide valuable insights for firms seeking to optimize their investment policies and augment financial performance. Highlights: Strategic Investment Opportunities: Emphasizes the pivotal role of identifying and leveraging investment opportunities to enhance corporate profitability. IOS Interaction and Strengthening: Highlights the positive impact of Investment Opportunity Set (IOS) on profitability, further strengthened by its interaction with investment cash flow. Institutional Ownership and Firm Size Influence: Underscores the positive influences of institutional ownership and firm size on corporate profitability, providing actionable insights for optimizing investment policies. Keywords: Investment Policy, Opportunity Set, Cash Flow, Institutional Ownership, Firm Size

Testing Financial Constraint Hypothesis of Investment in NEPSE Listed Companies

This study aims to test financing constraints of Nepalese firms and its impact on investment behavior by controlling the accelerator effect. It divides the firms into Financially Constrained (FC) and Unconstrained (UC) group using discriminant analysis and uses Econometric Model to analyze investment cashflow sensitivities (ICFS) of firms. The data comprised the accounting observations (n=256) obtained from the annual reports of 16 non-financial companies listed in Nepal Stock Exchange Ltd. Results show that financially constrained firm exhibit higher cashflow sensitivity indicating significant influence of financing constraints on Nepalese firm's investment behavior. It documents the evidence of financial market inefficiency, urging for policy prescriptions to address these constraints and spur investment and growth.

The Impact of the Covid-19 on Real Estate Companies: Vanke A and Poly Development

The COVID-19 pandemic has had a profound impact on the global macroeconomic landscape, social order, and corporate operations. In light of the prevailing trend of economic globalization, the pandemic has significantly affected this process, but it will not deter the progress of economic globalization. The COVID-19 pandemic has not only had a considerable impact on various countries worldwide but has also affected China. To protect the lives and health of our citizens, China has implemented strict containment policies. The pandemic has also had a significant impression on company operations. Our research focuses on two major Chinese real estate companies, "Poly Developments" and "Vanke A." Both companies have publicly available and transparent financial reports that include information on profit figures, profit margins, cash flow, and debt situations. Despite the impact of the COVID-19 pandemic, Vanke witnessed a downward trend in total revenue and cash flow from 2019 to 2021, but a slight recovery was observed in 2022. Vanke displayed stable revenue growth in its development activities and gradually stabilized its profitability. The company also prioritized effective cash flow management and pursued a diversified development strategy, leading to a significant year-on-year increase in investment cash flow. Overall, Vanke exhibited remarkable performance in sustainable strategic planning, collaboration, and operational activities, maintaining its position as an industry leader.

PENGARUH LABA BERSIH DAN ARUS KAS TERHADAP HARGA SAHAM PADA PERUSAHAAN SUB SEKTOR KIMIA YANG TERDAFTAR DI BURSA EFEK INDONESIA

This study aims to determine the effect of Net Profit, Operating Cash Flow (AKO), Investing Cash Flow (AKI), and Financing Cash Flow (AKP) on Stock Prices of the chemical sector listed on the BEI for the 2016-2020 period with a population of 12 companies and 45 samples for 5 years. The data analysis in this study is a statistical analysis by collecting data through the data testing stage, namely: Normality Test, Multicollinearity Test, Heteroscedasticity, Auto-correlation Test, Regression Analysis Method, and Hypothesis Testing Test (partial and simultaneous) using the SPSS 25 software. The results of this study show that Net Income and Investing Cash Flow (AKI) have a significant effect on Stock Prices, meanwhile, Operating Cash Flow (AKO), and Financing Cash Flow (AKP) have no significant effect on Stock Prices. Net Profit, Operating Cash Flow (AKO), Investing Cash Flow (AKI) and Financing Cash Flow (AKP) simultaneously have significant effects on Stock Prices. Investing Cash Flow (AKI) is the dominant factor influencing Stock Price.
 Keywords: Net Profit; Operating Cash Flow; Investing Cash Flow; Financing Cash Flow, Stock Prices

Relevansi Informasi Akuntansi terhadap Harga Saham pada Sektor Pertambangan

Abstract
 The purpose of this study is to determine the relevance of the values of accounting information to the company's stock price. Each company does not provide direct authority in providing company financial information to external groups, namely investors and creditors. Therefore, they rely on information in the form of financial reports provided by management. The theory used in this research uses clean surplus theory, market efficiency theory, signal theory, and value relevance theory. Clean surplus theory provides assumptions about how to show the market value of a company based on the values contained in the balance sheet and income statement. The theory of market efficiency explains the security prices with published accounting information have value relevance. Signal theory explains the signal from the sender (the owner of the information) which provides relevant information to the receiver that is useful for increasing decision-making power. Value relevance theory explains about an information that is used to explain or describe the values of the company. This study uses secondary data observation techniques obtained from the annual financial statements of mining companies listed on the Indonesia Stock Exchange for the period 2012-2021. This research using a non-probabilistic sampling technique, using a purposive sampling method where in this method the sampling uses certain criteria. The total sample obtained reached 120 research samples. The data analysis techniques used include descriptive statistical analysis, coefficient similarity test, classical assumption test, multiple linear regression analysis, F statistic test, t statistic test, and coefficient of determination test. The results showed that the F test (α = 0.05) obtained a significance value of 0.000 so it can be said that the test is acceptable. Based on the t test, the value of significance Book Value Per Share (BVPS), Investing Cash Flow (CFINV), and Financial Cash Flow (CFFIN) each of 0.000, 0.000 and 0.010 so that H2, H4, and H5 are accepted. However, the value of significance for the Earning Per Share (EPS) and Operating Cash Flow (CFOPS) variables each of 0.144 and 0.304 so that H1 and H3 are rejected.

Geopolitical risk and investment-cash flow sensitivity: An empirical analysis for Indian business group-affiliated firms and non-business group-affiliated firms

This study empirically examines the effect of GPR (geopolitical risk) on investment–cash flow sensitivity of Indian business group-affiliated firms and non-business group-affiliated (independent) firms. This study finds that GPR increases investment–cash flow sensitivity. Further, this study reveals that the impact of GPR on investment–cash flow sensitivity is less (greater) for business group-affiliated (independent) firms. In addition, the results of this study are robust across alternate measurements of the GPR (GPR Threat & GPR Act), dependent variable, and excluding the crisis & COVID-19 period.

Pengaruh Aruskas, Likuiditas Dan Profitabilitas Terhadap Return Saham Pada Perusahaan Manufaktur Yang Terdaftar Di BEI Subsektor Makanan Dan Minuman Periode 2017-2021

The purpose of this study is to investigate and evaluate how cash flow, liquidity, and profitability affect stock returns. The study population consist of food and baverage subsector companies listed on the Indonesian Stock Exchange (IDX) between 2017 and 2021. A sample of 24 companies was created using a targeted sampling technique. Secondary data from numerous reliable sources served as the basis for the data. Cash flow, liquidity, and profitability are independent variables. stock returns is the dependent variable. Secondary data were collcted in this study using a documented approach. According to the test results, profitability has a positive impact on stock returns whereas investment cash flow has no impact and liquidity has a negative impact.
 Keywords: cash flow, liquidity, profitability, stock return