Business, Management and Accounting
3 years ago

Companies with financing constraints face higher investment-cash flow sensitivity

SSRN Electronic Journal
The Effect of Financing Constraints on Corporate Investment: The SA-Index Approach
Novi Anri, Zuliani Dalimunthe, Wasilah Wasilah

Paper Summary

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The study looked at how a company's money and investment options affect its decisions when it has trouble getting financing. They studied 278 companies in Indonesia from 2014 to 2018. Companies with financing issues were more sensitive to how much they invested compared to companies with no issues. Companies with money inside and good investment chances invested more when facing financing problems or having neutral financing status. But for companies with no financing problems, there was no clear link between their money and investment choices.