We empirically examine the effect of exposure to temporary and persistent cash flow shocks on firm investment and its link with cash holdings. Theoretical models demonstrate that an expectation channel drives a wedge between the investment effects of temporary and persistent cash flow shocks,...

We study how firms allocate cash flow by estimating the cash-flow sensitivities of various uses of cash flow. We decompose cash flow into a transitory and a permanent component and focus on the allocation of the transitory component, which by construction contains little information about future...

Almeida, Campello, and Weisbach (2004) show that cash flow sensitivities are higher for firms that are financially constrained. This paper updates and extends the work of Almeida, Campello, and Weisbach to account for possible misspecification of financial constraints as well as changes in firm...

Low cash flow volatility firms receive stronger signals about future cash flow from a given cash flow shock, yielding a larger drop in demand for external finance and their cost of external finance, implying higher investment-cash flow sensitivities (ICFS). Empirical analysis in 6 European...

Environmentally-sustainable investment can impact firm financial performance through multiple channels. We concentrate on disentangling the related cash flow and valuation impacts. By using an instrumental variable approach, we find that U.S. REITs with a more environmentally-sustainable...

Investment cash flow sensitivity constitutes one important block of the corporate financial literature. While it is well documented in standard corporate finance, it is still young under behavioral corporate finance. In this paper, we test the investment cash flow sensitivity among panel data of...

The yield to maturity (YTM) or internal rate of return (IRR) is a metric used in financial analysis to estimate the profitability of potential investments. Almost all finance textbooks state the following conditioning assumptions: (i) that the coupon payments can be reinvested at a rate equal to...

Free Cash Flow (FCF) was adopted in the late 1980s as a financial tool to evaluate the firm and its individual projects. We question the procedure of calculating the FCF where a significant portion of Current Liabilities is offset against Current Assets, thereby creating the hybrid asset Net...

We examine the role of a country's institutional framework for investment and financing activities. A country's financial structure, investor rights, and legal environment are important determinants of the relation between internal cash flow and firms' investment and financing behavior. Firms...

In recent theories of financial analysis, a financial approach has been adopted which is based on the dynamic (modern) coefficients established from cash flows - cash flow indicators. Some of the areas of their application are capital investments, which largely depend on internal sources of...