Investment-cash Flow Research Articles

Innovation and Investment in High-Tech Firms in Financially Constrained Environment

Present study measures the effect of financing constraints on capital investment and innovation investment of Chinese firms from 2004-2015. Consistent with previous literature we use the sensitivity of investment to cash flow and sensitivity of innovation investment as a signal of financial constraints. Panel data estimation results lead us to arrive at three important conclusions. First; Chinese firms usually face financial constraints problems due to imperfect financial markets. Second; Chinese firms face investment cash flow sensitivity. Third; Chinese high-tech firms face innovation investment cash flow sensitivity. Hence, despite the financial efforts of the Chinese government, capital markets are still not efficient and create liquidity constraints. Results depict that firms classified a priori as more prone to financial constraints (based on KZ index) show higher sensitivity to cash flow.

Corporate strategy uniqueness, analyst herding, and financing constraints

This study is based on the premise that firms pursuing unique corporate strategies impose a high information cost on security analysts. A difficult information environment will foster analyst herding and lead to financing constraints for firms with unique corporate strategies. We find that corporate strategy uniqueness is positively related to analyst herding, which suggests that strategy uniqueness is associated with greater information asymmetry between corporate insiders and outsiders. Furthermore, we find that firms with more unique strategies have higher investment–cash flow sensitivity, indicating that strategy uniqueness makes it harder for firms to obtain external financing. Our findings contribute to research about the consequences of pursuing strategies that security analysts are unwilling or unable to value.

CASH FLOW, DEBT ISSUANCE, EQUITY ISSUANCE, AND FIXED ASSET INVESTMENT ON MANUFACTURE COMPANY 2010-2014CASH FLOW, DEBT ISSUANCE, EQUITY ISSUANCE, AND FIXED ASSET INVESTMENT ON MANUFACTURE COMPANY 2010-2014

Matters about financing decision based on pecking order theory’s hierarchy are currently appealing. This research strives to discover how corporate’s fixed asset investment reacts to cash flow, debt issuance, and equity issuance. Researcher uses 75 samples of manufacturing company in Indonesia during 2010-2014 period with 199 firm-year observation. Multiple linear regression’s result indicates that cash flow and debt issuance have influence towards corporate’s fixed asset investment, but the equity issuance have no influence towards corporate’s fixed asset investment. Also regression coefficient exhibits that manufacturing company in Indonesia follows pecking order theory’s hierarchy. Cash flow’s influence towards fixed asset investment is more significant than debt issuance’s, and debt issuance’s influence is stronger than equity issuance. This points out that corporate’s fixed asset investment is more sensitive towards cash flow (internal fund) compared to debt issuance (external fund), and so is debt issuance is more sensitive compared to equity issuance. With all that in mind, it is concluded that manufacturing company in Indonesia follows pecking order theory in terms of financing decision, which uses internal fund at first then started to use external fund if deemed necessary.

Pengaruh Defisit Pendanaan Internal Terhadap Struktur Modal

Companies manage its capital structure in order to provide benefits to the company so as to encourage management to manage the capital structure so that the composition of debt or equity can be adjusted with the aim of management in selecting the composition. This research focuses on the pecking order theory by taking a sample of 33 property, real estate, and building construction companies listed on the Indonesia Stock Exchange with the observation year 2015 to 2017. The purpose of this study is to see if there is consistency of research, as well as the previous studies to answer the research gap of extended pecking order theory model to see the effects of internal funding deficit and the debt ratio to the addition of forming internal funding deficit (dividends payment, additional working capital, investment and net cash flow) for additional debt ratio that can be used as a factor affecting changes in capital structure. The final results in this study support the hypothesis that the entire internal funding deficit has a positive effect on additional debt ratio. Dividend payments, additional working capital, net cash flow, and investment have a positive effect. So the company can be said to support the pecking order theory. Keywords—: capital structure; pecking order theory; internal funding deficit; dividend payments; additional working capital.

Expected Investment Premium in China Capital Market

Through a measurement of corporate investment plan, i.e. expected investment cash flow growth (EICFG), which combines historical equity issuance and factors that influence firm’s future investment, this paper studies the impact of investment expectation on firm’s cross-sectional return of stock in China capital market. I document the negative correlation between EICFG and future stock return in A-share market, and find out that stocks of firms with higher growth of investment cash flow performs significantly worse than those with lower growth of investment cash flow in one year. Our long-short EICFG portfolio generates a statistically and economically significant return which cannot be captured by leading factor models. I further disentangle the covariation between EICFG and expected stock return from rational and behavioral perspective. This paper also extends the research of investment premium to investment-based asset pricing model.

The ability of cash flows to predict the earning

This study aims to test is ability of cash flows to predict the earning, his research is expected to give contribution in providing evidence on whether (1) operating cash flow useful to predicting earning. (2) Investing cash flow useful to predicting earning. (3) Financing cash flow useful to predicting earning. In the present research, Statistical population consists of firms listed on London Stock Exchange Group (LSEG) during 2015-2018. Earning (dependent variable) was measured by net income, operating income and independent variable, namely cash flows through operating, investing and financing operations. The results generally indicates the models' ability to interpret hypothesis and confirm the ability of cash flows to predict earnings

WHAT HAPPENED TO THE WILLINGNESS OF COMPANIES TO INVEST AFTER THE FINANCIAL CRISIS? EVIDENCE FROM LATIN AMERICAN COUNTRIES

AbstractIn this article we investigate the changes in corporate investment dynamics in the aftermath of the global financial crisis. Using firm‐level data from six Latin American countries from 2002 to 2015, we show that firms are less constrained and have greater ability to invest after the crisis. However, the willingness of firms to invest optimally is reduced. This is supported by strong evidence that during the postcrisis period investment–cash flow sensitivity disappears, investment‐q sensitivity increases, and the estimated speeds of adjustment for target investment decrease. Moreover, after the crisis, firms notably increase their efforts to attain optimal cash and leverage levels. Our analysis implies that firms may not always be willing to invest optimally. The willingness to invest optimally appears to be time variant and moves together with the dynamics of cash and leverage policies, albeit in opposite directions.

PENGARUH ARUS KAS TERHADAP HARGA SAHAM PADA PERUSAHAAN MANUFAKTUR DI BURSA EFEK INDONESIA PERIODE 2015-2018

This study aims to analyze the effect of cash flow from operating activities, investment activities, funding activities that have an impact on stock prices and analyze the effect of cash flows from operating activities, investment activities, funding activities simultaneously affecting stock prices. Data analysis methods used are quantitative descriptive analysis and multiple regression analysis.
 Based on the results of a partial test, the effect of cash flow from operating activities on stock prices has a positive and significant effect, thus the first hypothesis is accepted. Based on the results of a partial test between investment cash flow to stock prices, it was found that cash flow from investment activities was not significant, thus the second hypothesis was rejected. Based on the results of a partial test between the cash flows of funding activities against the stock price, it was found that the funding cash flow was not significant. This can be interpreted that the funding cash flow has no effect on stock prices, thus the third hypothesis is rejected. And the results of simultaneous tests prove that there is a simultaneous influence between cash flow operating activities, investment activities and funding activities on stock prices. Thus the fourth hypothesis is accepted.

Does Cultural Difference Affect Investment–Cash Flow Sensitivity? Evidence from OECD Countries

AbstractWe investigate the influence of national culture on corporate investment–cash flow sensitivity. We conjecture that national culture shapes managerial perceptions of information asymmetry and agency problems, thus impacting the investment–cash flow relationship. We document empirical evidence in support of our claim. By linking the investment–cash flow sensitivity to cultural differences, our findings show that, while collectivism has an attenuating influence, uncertainty avoidance, power distance and masculinity have a reinforcing effect on the relationship between cash flow and investment. Our results hold for a sample of 205,268 firm‐years across 24 OECD countries between 1990 and 2017, and are robust after accounting for alternative statistical approaches, sample compositions and measures of cultural dimensions, along with controls for institutional and governmental factors. In addition, by decomposing cash flow into uses and sources of funds in a dynamic multi‐equation model, where firms make financing and investment decisions jointly subject to the constraint that sources must equal uses of cash, we find that national culture shapes how firms react to changes in cash flow.

Investment Cash Flow Sensitivity and Tobin’s Q: The Case of Advanced Emerging Markets in Latin America

This paper examines whether the capital market and the internal generation of cash flows bring relevant information to decisions on corporate investments. For this investigation, we used data from 255 companies located in four Latin American (LA) countries: Brazil, Chile, Mexico and Peru (BCMP countries). The analysis period is from 2000 to 2017. The results indicate that cash flow represents one of the main drivers of corporate investments. In contrast, there were no indications that the capital market translates into a mechanism for transmitting useful information to firm managers about investments. Other drivers of value identified are associated with sales, cash and cash equivalents, and asset tangibility.

Can Capital Adjustment Costs Explain the Decline in Investment-Cash Flow Sensitivity?

It is well documented that since at least the 1970s investment-cash flow (I-CF) sensitivity has been decreasing over time to disappear almost completely by the late 2000s. Based on a neoclassical investment model with costly external financing, we show that this pattern can be explained by the gradual increase of capital adjustment costs. The result is corroborated in the supplementary analysis that exploits the cross-country and cross-industry variation of capital adjustment costs, as proxied by the level of technological advancement. More generally, our findings demonstrate that I-CF sensitivity should only be interpreted as a joint measure of financial and real frictions.

Analysis of cash holding on investment cash flow sensitivity in Indonesia

Analysis of cash holding on investment cash flow sensitivity in Indonesia

Investment to Cash Flow Sensitivity: Evidence from Manufacturing and Energy Sectors

ABSTRACT The persistent decline in investment-cash flow sensitivity (ICFS) in U.S. manufacturing firms has raised questions about what causes ICFS and its decline. We examine ICFS in U.S. and Canadian energy firms which have higher asset tangibility that changes little over time compared to manufacturing firms. We find that ICFS is dominated by investment–cash flow–tangible capital sensitivity and that there is no persistent ICFS decline in the energy sector. We further use two cycles of the oil price boom and bust (2004–2015) as a natural experiment to distinguish between financial constraint and asset tangibility explanations and find that the asset tangibility hypothesis can better explain the findings. Our findings have implications for emerging economies with the oil sector as the main driver of the economy and suggest that fiscal and economic policies could mitigate the adverse effects of these oil price shocks on the economy.

Impact of Conditional Conservatism and Agency Cost on Investment Cash Flow Sensitivity

Impact of Conditional Conservatism and Agency Cost on Investment Cash Flow Sensitivity

The effect of earning information, cash flow components, and financing decision on stock returns: empirical evidence on Indonesia stock exchange

Trading, Service, and Investment sectors show an essential role in the national economy, and they have grown significantly during the past years. They have created many job opportunities in both the formal sector and the non-formal sector. This study aims to analyze the effect of net profit, operating cash flow, financing cash flow and investing cash flow and, financing decisions on stock’s return of service industry listed at Indonesia Stock Exchange (IDX). The analysis was done using the data panel regression. It shows that earning information, operating cash flow, financing cash flow positively affect stock returns. However, investing cash flow and financing decisions (proxy leverage) show a negative effect on the stock's return significantly. Simultaneously, the variables above affect stock return significantly. The implication is that management should pay more attention to financial factors, especially net profit, cash flow, and leverage to increase stock return and the company’s value.

Sharia-compliance and investment-cash flow sensitivity in oil rich countries

PurposeThe purpose of this paper is to examine the effect of Sharia-compliance (SC) on investment sensitivity to internal funds in oil rich countries.Design/methodology/approachA fixed-effect panel technique with OLS regression is used to investigate such relationship applying data from a sample of 207 non-financial firms listed on the Gulf Cooperation Council (GCC) stock markets over the period 2009–2014.FindingsThe results show that the investment-cash flow (ICF) sensitivity is positive, and is a lot larger for more constrained firms. Compared to developed markets, the results show higher ICF sensitivity in GCC countries. The evidence also shows that SC decreases the dependence of firms on internally generated funds when undertaking new investment projects. Unexpectedly, the results reveal that the ICF sensitivity increases when liquidity becomes abundant. Additional analysis suggests that investment expenditures of firms display a greater sensitivity to cash flow in the crisis period.Practical implicationsThe implications of this study are that SC is a nature of business that reduces the propensity of corporations to undertake inefficient investments that are derived from capital market imperfections. However, manager ability to overinvest increases when liquidity is abundant suggesting that cash-rich firms are more likely to engage in value-decreasing projects.Originality/valueThe proposed study presents several originalities. First, it provides evidence on ICF sensitivity in specific emerging economies, namely the GCC countries. Second, it highlights the issue of efficient investment. For this purpose, the present paper focuses on Sharia-compliant (SC) firms where financial constraints are bound to be more stringent than for non-Sharia-compliant (NSC) firms. Finally, the study findings enable us to investigate what the sudden abundance of liquidity, generated by the record levels of oil prices, as well as the financial crisis implied for the ICF relationship.

Investor behavior based on personality and company life cycle

Abstract This study aims to ensure that the behavior of individual stock investors has the best pattern in accordance with the existing personality, and see the business cycle starting from introduction, growth, maturity, decline in LQ-45 from the proxy of operational cash flows, investment cash flows, and funding cash flows. This study uses the Analytical Hierarchy Process (AHP) method to see what behavior tends to be used in carrying out shareholding transactions. The results of this study create a behavior model of individual stock investors. Individual stock investors in Indonesia tend to have precision personality types in making stock transaction decisions. This type is a dominant combination, stability, and compliance. The model of individual stock investor behavior starts from making a price target; has a relationship between investors to exchange information related to shares monitored; valuation of shares to be transacted. In addition, the behavior of individual stock investors tends to have accounting information and corporate environmental concerns. Behavioral model Individual stock investors who already have two years or more experience in stock transactions, will have a unique pattern of technical analysis and their own fundamental analysis.

The effect of debt policy, company value, company size, investment cash flow on stock returns on mining companies listed on Indonesia Stock Exchange

Investment is a delay in consumption now to be allocated to productive assets which are expected to generate profits in the future, which is called stocks return. Mining company in Indonesia is an attractive sector to invest in stocks because from a geographical perspective, Indonesia is an archipelago structure that contains mining products. There are risks that will be experienced by investors when investing, namely systematic risk and unsystematic risk. Unsystematic risk can be avoided because related to management decisions. Knowing and analyzing the effect of debt policy, firm value, company size, investment cash flow on stock returns on mining companies listed on the Indonesian Stock Exchange. The statistical method used in this study is multiple regression analysis. The sample in this study is a mining company that has go public and published audited financial statements 2013-2017 with 84 data processed consisting of 28 companies each year. The results of hypothesis testing can be concluded that debt policy and firm value have significant effect on stock returns while firm size and investment cash flow does not have significant effect on stock returns. Investor will be interested in investing in companies with good financial performance rather than bad financial performance.

Investment, Tobin's Q, and Cash Flow Across Time and Frequencies

AbstractThe investment literature has long acknowledged the time‐ and frequency‐varying dynamics of the relationship between investment, Tobin's Q and cash flow. In this paper, we use continuous wavelet tools to estimate and assess the relationship between these variables simultaneously at different frequencies and over time. We find that (i) Q and cash flow are complementary sources of information for investment, the former being more important for firms’ investment decisions in the medium‐to‐long run and the latter at business cycles frequencies; and (ii) investment‐Q sensitivity declines over time at all frequencies, while investment–cash flow sensitivity declines at business cycles frequencies but remains largely stable over the medium‐to‐long run.

EFFECT OF INFORMATION ON ACCOUNTING PROFITS AND CASH FLOW COMPONENTS ON STOCK PRICES OF INSURANCE COMPANIES LISTED IN INDONESIA STOCK EXCHANGE (BEI) 2008-2012 PERIOD

Many factors influence the fluctuation of stock prices, including: deposit interest rates, stock trading volume, return on equity, earnings per share. The last two factors are part of the financial statements presented by the issuers. The financial statements contain accounting earnings information and cash flow. Therefore it is necessary to examine empirically whether accounting earnings and cash flows have an influence on changes in stock prices. Data is collected from the stock prices of insurance companies that have gone public in the Jakarta Stock Exchange which have a nominal value per share of Rp.1,000.00 (one thousand rupiah) from 2008 to 2012. This study took 10 existing insurance companies to analyze. The basis for this sampling is based on the amount of data available on the Jakarta Stock Exchange Website. From the results of variable analysis of total cash flow and accounting profit variables in the first equation individually can not significantly influence stock prices. And together all the independent variables have no effect simultaneously on stock prices. The value of Squared R is very low, which means that the variable cannot explain stock prices, but can be explained by other variables not included in the research model. Variable operational cash flows, investment cash flows and funding cash flows in the second equation individually can not influence stock prices significantly. And together all the independent variables have no effect simultaneously on stock prices. Also obtained is a very low R Squared value, which means that the variable cannot explain stock prices, but can be explained by other variables not included in the research model