Munich Personal RePEc Archive

Uncertainty and Investment-Cash Flow Insensitivity: Evidence on Cautionary Channel

Kani, Masayo and Nakashima, Kiyotaka (2019): Uncertainty and Investment-Cash Flow Insensitivity: Evidence on Cautionary Channel.

This is the latest version of this item.

[thumbnail of MPRA_paper_109563.pdf]

Download (352kB) | Preview


This paper examines two hypotheses regarding how uncertainty affects investment--cash flow sensitivity. In this regard, one hypothesis pertains to the cautionary channel through which investment--cash flow sensitivity decreases as uncertainty increases, and the other relates to the financing constraint channel through which the sensitivity increases. This paper evaluates the impact of uncertainty on investment--cash flow sensitivity by using firm-level data on the Japanese manufacturing industry. We demonstrate that the cautionary effect that makes actual corporate investment decisions unresponsive to the firm's financing conditions becomes dominant under higher uncertainty irrespective of the type of corporate investment---capital investment and research and development (R\&D)---and is more pronounced in firms with fewer cash holdings.

Available Versions of this Item

Atom RSS 1.0 RSS 2.0

Contact us: mpra@ub.uni-muenchen.de

This repository has been built using EPrints software.

MPRA is a RePEc service hosted by Logo of the University Library LMU Munich.