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| Author: | Pawlina, G Renneboog, L. |
| Title: | Is investment-cash flow sensitivity caused by agency costs or asymmetric information? Evidence from the UK |
| Journal: | European Financial Management
2005 : SEP, VOL. 11:4, p.483-513 |
| Index terms: | Cash flow Investment Sensitivity analysis |
| Language: | eng |
| Abstract: | This paper analyses the investment-cash flow sensitivity and its causes. It is found that it results mainly from the agency costs of free cash flow. The magnitude of the relationship depends on insider ownership in a non-monotonic way. Financial institutions, the government and industrial firms reduce the cash flow sensitivity of investment via effective supervision. Financial institutions also play a role in moderating informational asymmetries between firms and capital markets. |
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