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| Author: | Vogt, S. C. |
| Title: | Cash flow and capital spending: Evidence from capital expenditure announcements |
| Journal: | Financial Management
1997 : SUMMER, VOL. 26:2, p. 44-57 |
| Index terms: | CASH FLOW CAPITAL SPENDING PATTERNS CAPITAL EXPENDITURE |
| Language: | eng |
| Abstract: | This paper analyses the role of cash flow in explaining capital-spending decisions and the price response to announcements of those decisions. The level of announced capital spending is positively and strongly related to the level of cash flow and cash flow's influence on capital spending increases as firm size decreases and as insider ownership increases. Positive, abnormal returns around capital-spending announcements are associated with companies having low cash-flow coverage, and small asset size, and marginally with companies with both high and low inside-ownership levels. Abnormal returns increase for small firms as cash flow financed spending increases. |
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