To what extent are savings-cash flow sensitivities informative to test for capital market imperfections?

Tsoukalas, J., Tsoukas, S. and Guariglia, A. (2017) To what extent are savings-cash flow sensitivities informative to test for capital market imperfections? Review of Finance, 21(3), pp. 1251-1285. (doi:10.1093/rof/rfw043)

[img] Text
119424.pdf - Accepted Version
Restricted to Repository staff only until 10 September 2018.

348kB

Abstract

We construct a simple model with lumpy investment, cash accumulation and costly external finance. Based on this model, we propose a new savings specification aimed at examining savings behavior in the presence of investment lumpiness and financial constraints. We then test a key prediction of our model, namely, that under costly external finance, savings-cash flow sensitivities vary significantly by investment regime. We make use of a panel of firms from transition and developed economies to estimate the new savings regression which controls for investment spikes and periods of inactivity. Our findings confirm the validity of the model's prediction.

Item Type:Articles
Status:Published
Refereed:Yes
Glasgow Author(s) Enlighten ID:Tsoukalas, Professor John and Tsoukas, Professor Serafeim
Authors: Tsoukalas, J., Tsoukas, S., and Guariglia, A.
Subjects:H Social Sciences > HG Finance
College/School:College of Social Sciences > Adam Smith Business School > Economics
Journal Name:Review of Finance
Publisher:Oxford University Press
ISSN:1572-3097
ISSN (Online):1573-692X
Published Online:10 September 2016
Copyright Holders:Copyright © 2016 The Authors
First Published:First published in Review of Finance 21(3)1251-1285
Publisher Policy:Reproduced in accordance with the publisher copyright policy

University Staff: Request a correction | Enlighten Editors: Update this record