تاثیر نواقص بازار سرمایه بر حساسیت جریان سرمایه گذاری نقدی

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.

As argued by Modigliani and Miller (1958), the investment decisions of firms are not affected by their financing decisions in perfect capital markets. Capital markets, however, are not perfect, and existing imperfections introduce a wedge between the costs of external and internal funds. Firms facing higher informational imperfections experience a wider wedge, and therefore are more financially constrained. A measure that has been used in the literature to assess the degree of financial constraints experienced by firms is the sensitivity of investments to the availability of internal funds, controlling for investment opportunities as measured by Tobin’s Q. A number of studies, starting with Fazzari et al. (1988), show that investment is more sensitive to cash flow for firms that have a high degree of financial constraints. 2 On the other hand, Kaplan and Zingales, 1997 and Cleary, 1999 show that investment–cash flow sensitivity can be higher for unconstrained firms. 3 Additionally, Gilchrist and Himmelberg, 1995, Erickson and Whited, 2000 and Alti, 2003 argue that measurement problems associated with Tobin’s Q affect the estimated sensitivity of investments to the availability of internal funds. There has been little investigation of the evolution of investment–cash flow sensitivities over time. The evidence that exists suggests that it has decreased over time in the US: while earlier papers in the area (Fazzari et al., 1988 and Kaplan and Zingales, 1997), using data from the seventies and early eighties, have reported sensitivities in the (0.4, 0.7) range, studies employing data from the late eighties and nineties (Cleary, 1999 and Erickson and Whited, 2000) have found sensitivities in the (0.1, 0.2) range. Therefore, in this paper, we first examine whether there is a decline in investment–cash flow sensitivity through time. Applying the Erickson–Whited estimators to US manufacturing firm data, we find that, consistent with Erickson and Whited (2000), cash flow is not significant in explaining investment for the period from 1992 to 1995. Extending the analysis to a much longer sample period (1970–2001), however, we find that while the role of Q increases and that of cash flow declines (relative to OLS estimates) in explaining investment, cash flow continues to be a significant factor in most of the sub-samples examined. 4 Of particular interest is the finding that the declining pattern of estimated cash flow effects is robust to the application of the Erickson–Whited estimators. If investment–cash flow sensitivity is linked with capital market imperfections, then it should decrease with factors that reduce these imperfections. There is some international cross-sectional evidence to support this hypothesis. Wurgler (2000) examines cross-sectional data from 65 countries, and shows that capital allocation is more efficient in financially developed markets. Using cross-sectional data for several countries, Love, 2003 and Islam and Mozumdar, 2007 show that the sensitivity of investment to cash decreases with financial market development. We pursue this analysis further by focusing on US firms and examining the relation between their investment–cash flow sensitivities and five factors related to capital market imperfections – aggregate fund flows, institutional ownership, analyst following, bond ratings, and corporate governance.5 Again, to control for the measurement problems related to Tobin’s Q, we apply the GMM estimators of Erickson and Whited (2000) in addition to OLS. Our evidence suggests that the sensitivity of investment to internal funds decreases with factors that reduce capital market imperfections.6 Specifically, we find that investment–cash flow sensitivity reduces with increasing fund flows, institutional ownership, analyst following, antitakeover amendments and with the existence of a bond rating. Therefore, the sensitivity of investments to the availability of internal funds cannot be explained solely as an artifact of measurement error. The rest of the paper is organized as follows. Section 2 provides a brief summary of the basic q model of investments, the measurement error problem in estimating it, as well as the major hypotheses. Section 3 describes the data. Section 4 analyzes the time series characteristics of investment–cash flow sensitivity. Section 5 examines the relation between investment–cash flow sensitivity and the factors associated with capital markets. Section 6 concludes the paper.

This paper examines the sensitivity of investments to the availability of internal funds using US manufacturing firm data. The paper first shows that there has been a steady decrease in investment–cash flow sensitivity over time, and that this decline cannot be explained on the basis of measurement error alone. Next, investment–cash flow sensitivity is examined in relation to five capital-market-related factors: fund flows, institutional ownership, analyst following, bond ratings, and antitakeover amendments. By analyzing the relation of investment–cash flow sensitivity to these five capital-market-related factors, we explore whether this sensitivity reduces with factors that decrease capital market imperfections. Our findings indicate that investment–cash flow sensitivity decreases when there is a reduction in capital market imperfections through increased fund flows, institutional ownership, analyst following, antitakeover amendments and with the existence of a bond rating. Thus capital market factors that decrease market imperfections and as a result reduce the cost wedge between external and internal funds, lead to lower investment–cash flow sensitivities. It is possible that the decline in investment–cash flow sensitivity has been due to reduction in capital market imperfections over time. However, such an inference cannot be made categorically without a direct time series analysis of the relation between the two. We leave that exercise for future research.