On the sensitivity of firms' investment to cash flow and uncertainty

Baum, Christopher F., Caglayan, Mustafa and Talavera, Oleksandr (2010) On the sensitivity of firms' investment to cash flow and uncertainty. Oxford Economic Papers, 62 (2). pp. 286-306. ISSN 1464-3812

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Abstract

We investigate the analytical and empirical linkages between cash flow, uncertainty, and firms' capital investment behavior. Our empirical approach constructs measures of own- and market-specific uncertainty from firms' daily stock returns and S&P 500 index returns along with a CAPM-based risk measure. Our results indicate that even in the presence of important firm-specific variables, uncertainty is an important determinant of firms' investment behavior. Depending on the measure of uncertainty used, investment may be stimulated or curtailed by the effects of uncertainty on its own or through its interactions on cash flow.

Item Type:	Article
Faculty \ School:	Faculty of Social Sciences > School of Economics
Depositing User:	Gina Neff
Date Deposited:	16 Nov 2010 16:01
Last Modified:	17 Aug 2023 08:30
URI:	https://ueaeprints.uea.ac.uk/id/eprint/10906
DOI:	10.1093/oep/gpp015

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