Open AccessIndustry And Liquidity Effects In Corporate Investment And Cash Relationships
Author(s) -
William T. Charlton,
Carol Lancaster,
Jerry L. Stevens
Publication year - 2011
Publication title -
journal of applied business research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.149
H-Index - 22
eISSN - 2157-8834
pISSN - 0892-7626
DOI - 10.19030/jabr.v18i1.2108
Subject(s) - cash , market liquidity , investment (military) , cash flow , monetary economics , style (visual arts) , economics , business , finance , political science , law , art , politics , literature
Prior studies find a positive relationship between a firm’s cash flow and investment, but researchers disagree over whether this finding can be attributed to financial constraints. In this paper we introduce two new ways to segment firms to test for differences in cash–investment relationships. Our findings suggest that relationships between internal cash and investment are more complex than prior studies assume. Internal liquidity plays a more important role in the investment process in some industries than in others. Attempts to generalize a theory for investment decisions based on internal cash holdings must account for differences in both industry and internal cash constraints.