The Cash Flow Sensitivity of Cash

Heitor Almeida, Murillo Campello, M. Weisbach
{"title":"The Cash Flow Sensitivity of Cash","authors":"Heitor Almeida, Murillo Campello, M. Weisbach","doi":"10.2139/ssrn.345840","DOIUrl":null,"url":null,"abstract":"We model a firm’s demand for liquidity to develop a new test of the effect of financial constraints on corporate policies. The effect of financial constraints is captured by the firm’s propensity to save cash out of cash flows (the cash flow sensitivity of cash). We hypothesize that constrained firms should have a positive cash flow sensitivity of cash, while unconstrained firms’ cash savings should not be systematically related to cash flows. We empirically estimate the cash flow sensitivity of cash using a large sample of manufacturing firms over the 1971 to 2000 period and find robust support for our theory. TWO IMPORTANT AREAS OF RESEARCH in corporate finance are the effects of financial constraints on firm behavior and the manner in which firms perform financial management. These two issues, although often studied separately, are fundamentally linked. As originally proposed by Keynes (1936), a major advantage of a liquid balance sheet is that it allows firms to undertake valuable projects when they arise. However, Keynes also argued that the importance of balance sheet liquidity is influenced by the extent to which firms have access to external capital markets (p. 196). If a firm has unrestricted access to external capital— that is, if a firm is financially unconstrained—there is no need to safeguard against future investment needs and corporate liquidity becomes irrelevant. In contrast, when the firm faces financing frictions, liquidity management may become a key issue for corporate policy. Despite the link between financial constraints and corporate liquidity demand, the literature that examines the effects of financial constraints on firm behavior has traditionally focused on corporate investment demand. 1 In an influential paper, Fazzari, Hubbard, and Petersen (1988) propose that when firms face financing constraints, investment spending will vary with the availability of internal funds, rather than just with the availability of positive net present","PeriodicalId":124312,"journal":{"name":"New York University Stern School of Business Research Paper Series","volume":"11 1","pages":"0"},"PeriodicalIF":0.0000,"publicationDate":"2003-05-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"2904","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"New York University Stern School of Business Research Paper Series","FirstCategoryId":"1085","ListUrlMain":"https://doi.org/10.2139/ssrn.345840","RegionNum":0,"RegionCategory":null,"ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"","JCRName":"","Score":null,"Total":0}
引用次数: 2904

Abstract

We model a firm’s demand for liquidity to develop a new test of the effect of financial constraints on corporate policies. The effect of financial constraints is captured by the firm’s propensity to save cash out of cash flows (the cash flow sensitivity of cash). We hypothesize that constrained firms should have a positive cash flow sensitivity of cash, while unconstrained firms’ cash savings should not be systematically related to cash flows. We empirically estimate the cash flow sensitivity of cash using a large sample of manufacturing firms over the 1971 to 2000 period and find robust support for our theory. TWO IMPORTANT AREAS OF RESEARCH in corporate finance are the effects of financial constraints on firm behavior and the manner in which firms perform financial management. These two issues, although often studied separately, are fundamentally linked. As originally proposed by Keynes (1936), a major advantage of a liquid balance sheet is that it allows firms to undertake valuable projects when they arise. However, Keynes also argued that the importance of balance sheet liquidity is influenced by the extent to which firms have access to external capital markets (p. 196). If a firm has unrestricted access to external capital— that is, if a firm is financially unconstrained—there is no need to safeguard against future investment needs and corporate liquidity becomes irrelevant. In contrast, when the firm faces financing frictions, liquidity management may become a key issue for corporate policy. Despite the link between financial constraints and corporate liquidity demand, the literature that examines the effects of financial constraints on firm behavior has traditionally focused on corporate investment demand. 1 In an influential paper, Fazzari, Hubbard, and Petersen (1988) propose that when firms face financing constraints, investment spending will vary with the availability of internal funds, rather than just with the availability of positive net present
现金的现金流量敏感性
我们对一家公司的流动性需求进行建模,以开发一种新的测试,以检验财务约束对公司政策的影响。财务约束的影响体现在企业从现金流中节省现金的倾向上(现金的现金流敏感性)。我们假设受约束的企业应该具有正的现金流量敏感性,而不受约束的企业的现金储蓄不应该与现金流量系统相关。我们在1971年至2000年期间使用制造企业的大样本经验估计现金的现金流量敏感性,并为我们的理论找到强有力的支持。公司财务研究的两个重要领域是财务约束对公司行为的影响和公司进行财务管理的方式。这两个问题虽然经常分开研究,但本质上是联系在一起的。正如凯恩斯(Keynes, 1936)最初提出的那样,流动性资产负债表的一个主要优势是,当有价值的项目出现时,它允许企业承担这些项目。然而,凯恩斯也认为,资产负债表流动性的重要性受到企业进入外部资本市场的程度的影响(第196页)。如果一家公司可以不受限制地获得外部资本——也就是说,如果一家公司在财务上不受限制——就没有必要防范未来的投资需求,公司的流动性也就变得无关紧要了。相反,当公司面临融资摩擦时,流动性管理可能成为公司政策的关键问题。尽管财务约束和企业流动性需求之间存在联系,但研究财务约束对企业行为影响的文献传统上关注的是企业投资需求。1在一篇有影响力的论文中,Fazzari、Hubbard和Petersen(1988)提出,当企业面临融资约束时,投资支出将随着内部资金的可用性而变化,而不仅仅是正净现值的可用性
本文章由计算机程序翻译,如有差异,请以英文原文为准。
求助全文
约1分钟内获得全文 求助全文
来源期刊
自引率
0.00%
发文量
0
×
引用
GB/T 7714-2015
复制
MLA
复制
APA
复制
导出至
BibTeX EndNote RefMan NoteFirst NoteExpress
×
提示
您的信息不完整,为了账户安全,请先补充。
现在去补充
×
提示
您因"违规操作"
具体请查看互助需知
我知道了
×
提示
确定
请完成安全验证×
copy
已复制链接
快去分享给好友吧!
我知道了
右上角分享
点击右上角分享
0
联系我们:info@booksci.cn Book学术提供免费学术资源搜索服务,方便国内外学者检索中英文文献。致力于提供最便捷和优质的服务体验。 Copyright © 2023 布克学术 All rights reserved.
京ICP备2023020795号-1
ghs 京公网安备 11010802042870号
Book学术文献互助
Book学术文献互助群
群 号:604180095
Book学术官方微信