Cash flow sensitivities of financial decisions: Evidence from an emerging market
Prague Economic Papers, cilt.27, sa.5, ss.554-572, 2018 (SSCI, Scopus)
- Yayın Türü: Makale / Tam Makale
- Cilt numarası: 27 Sayı: 5
- Basım Tarihi: 2018
- Doi Numarası: 10.18267/j.pep.675
- Dergi Adı: Prague Economic Papers
- Derginin Tarandığı İndeksler: Social Sciences Citation Index (SSCI), Scopus
- Sayfa Sayıları: ss.554-572
- Anahtar Kelimeler: Capital structure, Cash flow, Distribution decisions, Financial constraints, Financing decisions, Investment
- Açık Arşiv Koleksiyonu: AVESİS Açık Erişim Koleksiyonu
- Boğaziçi Üniversitesi Adresli: Evet
Özet
This study investigates the sensitivity of financing, investment, and distribution decisions to changes in operating cash flow, and whether these sensitivities depend on whether or not firms are financially constrained. Using a sample of 2,650 firm-years of Turkish firms for the period 1996 to 2013, we find that an increase in the short-term cash flows is associated with an increase in cash balances, irrespective of whether or not firms are financially constrained. However, unconstrained firms hold a larger cash balance than constrained firms. Dividends are positively related to the short-term cash flows of both types of firms. Investments are not sensitive to cash flow for either type of firms. An increase in their short-term cash flow induces the financially constrained firms to reduce debt financing, but makes the unconstrained firms increase their debt financing and reduce equity financing. Although firms in general prefer to use part of the saved cash in the long term, they do not deplete their cash savings. Constrained firms resort to debt financing in response to an increase in their long-term cash flow.