The impact of capital market imperfections on investment–cash flow sensitivity |
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Authors: | ?enay A?ca Abon Mozumdar |
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Institution: | 1. School of Business, George Washington University, 2201 G Street, Funger Hall 505, Washington, DC 20052, United States;2. Pamplin College of Business, Virginia Tech, 7054 Haycock Road, Room 352, Falls Church, VA 22043, United States |
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Abstract: | We examine the investment–cash flow sensitivity of US manufacturing firms in relation to five factors associated with capital market imperfections – fund flows, institutional ownership, analyst following, bond ratings, and an index of antitakeover amendments. We find a steady decline in the estimated sensitivity over time. Furthermore, we find that investment–cash flow sensitivity decreases with increasing fund flows, institutional ownership, analyst following, antitakeover amendments and with the existence of a bond rating. The overall evidence suggests that investment–cash flow sensitivity decreases with factors that reduce capital market imperfections. |
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Keywords: | G14 G31 G32 |
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