Corporate Investment and Financing Constraints: Connections with Cash Management
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Corporate Investment and Financing Constraints: Connections with Cash Management
Credit and Capital Markets – Kredit und Kapital, Vol. 39 (2006), Iss. 3 : pp. 455–483
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W. Allard Bruinshoofd, Amsterdam
References
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Bruinshoofd, W. A. (2003): Corporate Investment and Financing Constraints: Connections with Cash Management. DNB Staff Report 110. De Nederlandsche Bank, Amsterdam.
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Abstract
This paper surveys the use and usefulness of the investment-cash flow sensitivity in the broad literature on financing constraints in corporate investment. Building on the intense and ongoing debate on this subject matter, it explores directions for further research. Specific attention is paid to connections between corporate investment and cash management. Contemporary research on corporate cash management provides promising footholds to determine more sharply the instances where firms lack the internal means to initiate investment projects. The paper subsequently draws the outlines of a methodology to empirically assess more clearly the role of cash management in financially constrained investment and the informational content of the investment-cash flow sensitivity therein. (JEL E41, G31, G32)