This paper uses a panel of 24184 UK firms over the period 1993-2003 to study the extent to which the sensitivity of investment to cash flow differs at firms facing different levels of internal and external financial constraints. Our results suggest that when the sample is split on the basis of...

This paper develops a rich decision theoretic dynamic ¯rm model that analyzes productivity and interest rate shocks. The model is used to analyze the cyclical dynamics of fixed and inventory investment and in particular asks whether constraints to the flow of funds can generate the frequently...

Is cash flow important in explaining investment dynamics? A large body of empirical work argues that it is. This finding is further taken as evidence of capital market imperfections. We argue that time-to-build for capital projects creates an investment cash flow sensitivity as found in...

Cummins et al. (2006) construct a new measure of fundamentals, and show that the positive cash flow effects typically found in investment-Q models disappear when traditional Q is replaced with their new measure. Their results are not robust to small changes in their specification or in the...

The excess sensitivity of investment to cash flow has been demonstrated in numerous studies. Recent research has identified differences in the degree of sensitivity across countries, which it ascribes to the nature of the lender-borrower relationship in the financial systems of those countries....

Many recent studies have pointed out that firms with cash stocks or strong cash flow are financially resilient, enabling them to continue to invest and grow even when they experience economic shocks. In this paper we ask whether Asian firms were resilient to the recent financial crisis. Using...