Firm Size, Financial Constraints and Inverse Monotonicity of Investment-Cash Flow Sensitivity

Öz

Financial constraints hypothesis states that firms that are more likely to be financially constrained should have higher investment-cash flow sensitivity. This paper aims at testing the financial constraints hypothesis in a period when access to credit is relatively easy using firm size as a priori criterion for access to credit. We use data of firms listed on Borsa Istanbul during the period 2006–2017 and estimate regressions with panel fixed effects. We find that investment-cash flow sensitivities monotonically increase from small firms to large firms across four groups. The findings reject the financial constraints hypothesis and imply an inverse monotonic relationship between investment-cash flow sensitivities and financial constraints. We conclude that any difference in investment-cash flow sensitivities estimated by a cash flow-augmented q investment equation can’t be interpreted as an indicator of financial constraints especially when firms are not homogenous in terms of cash flow which can indicate financial distress or free cash flow problem.

Anahtar Kelimeler

• Firm Size
• Financial Constraints
• Investment-Cash Flow Sensitivity
• Financial Distress
• Free Cash Flow

Firma Büyüklüğü, Finansal Kısıtlar ve Ters Monotonik Yatırım-Nakit Akış Duyarlılığı

Öz

Çalışma, krediye erişimin göreceli olarak daha kolay olduğu bir dönemde krediye erişim için öncül kriter olarak firma büyüklüğünü kullanarak finansal kısıtlar hipotezini test etmeyi amaçlamaktadır. Çalışmada Borsa İstanbul’da 2006–2017 dönemi boyunca işlem gören firmaların verisi kullanılmıştır ve yatırım-nakit akış duyarlılıkları panel sabit etkiler yöntemi ile tahmin edilmiştir. Yatırım-nakit akış duyarlılıklarının küçük firmalardan büyük firmalara doğru monoton arttığı bulunmuştur. Bu bulgu finansal kısıtlar hipotezini reddetmektedir ve yatırım-nakit akış duyarlılığı ile finansal kısıtlar arasında ters monoton ilişki olduğu anlamına gelmektedir. Nakit akışı ile genişletilmiş q yatırım denklemi kullanılarak tahmin edilen yatırım-nakit akış duyarlılıkları arasındaki bir farklılığın, finansal kısıtların bir göstergesi olarak yorumlanamayacağı sonucuna varılmıştır. Nakit akışı finansal sıkıntıyı veya serbest nakit akışı problemini gösterebileceği için, bu sonuç özellikle firmalar nakit akışı açısından homojen olmadığında geçerlidir.

Anahtar Kelimeler

• Firma Büyüklüğü
• Finansal Kısıtlar
• Yatırım-Nakit Akış Duyarlılığı
• Finansal Sıkıntı
• Serbest Nakit Akışı

Kaynakça

1. Allayannis, G. and Mozumdar, A. (2004), The impact of negative cash flow and influential observations on investment–cash flow sensitivity estimates, Journal of Banking & Finance, 28(5), p.901–930.
2. Almeida, H., Campello, M. and Weisbach, M. S. (2004). The Cash Flow Sensitivity of Cash. The Journal of Finance, 59(4), 1777-1804.
3. Almeida, H., Campello, M. and Weisbach, M. S. (2021). The Cash Flow Sensitivity of Cash: Replication, Extension, and Robustness (Working Paper No. 2021-03-002). Fisher College of Business.
4. Arslan, Ö., Florackis, C. and Ozkan, A. (2006), The Role of Cash Holdings in Reducing Investment–Cash Flow Sensitivity: Evidence from a Financial Crisis Period in an Emerging Market, Emerging Markets Review, 7(4), p.320–338.
5. Audretsch, D. B. and Elston, J. A. (2002), Does Firm Size Matter? Evidence on the Impact of Liquidity Constraints on Firm Investment Behavior in Germany, International Journal of Industrial Organization, 20(1), p.1–17.
6. Beck, T., Demirgüç-Kunt, A., Laeven, L. and Maksimovic, V. (2004), The Determinants of Financial Obstacles (Working Paper No. 3204), World Bank.
7. Belen, M. and Karamelikli, H. (2016), Finansal Gelişme ve Yoksulluğun Azalması Arasındaki İlişki: Ampirik Bir İnceleme, AİBÜ Sosyal Bilimler Enstitüsü Dergisi, 16(1), p.125–141.
8. Benligiray, S. and Aydın, N. (2017), Borsa İstanbul Firmalarında Yatırımların Nakit Akışlarına Duyarlılığının İncelenmesi, Business and Economics Research Journal, 8(4), p.699–714.

9. Booth, L. and Cleary, S. (2006), Cash Flow Volatility, Financial Slack and Investment Decisions, 2006 China International Conference in Finance, Xi’an.
10. Cleary, S. (1999), The Relationship between Firm Investment and Financial Status, The Journal of Finance, 54(2), p.673–692.
11. Crisóstomo, V., López-Iturriaga, F. J. and Vallelado, E. (2012), Firm Size Matters for Financial Constraints: Evidence from Brazil, Sistemas & Gestão, 7(3), 490–501.
12. Demmou, L., Stefanescu, I. and Arquie, A. (2019). Productivity Growth and Finance: The Role of Intangible Assets - A Sector Level Analysis (Working Paper No. 1547), OECD.
13. Devereux, M. and Schiantarelli, F. (1990). Investment, Financial Factors, and Cash Flow: Evidence from U.K. Panel Data, (Ed.: R. G. Hubbard), Asymmetric Information, Corporate Finance, and Investment, pp. 279–306, Chicago: University of Chicago Press. Fazzari, S. M., Hubbard, R. G. and Petersen, B. C. (1988), Financing Constraints and Corporate Investment, Brookings Papers on Economic Activity, 1988(1), p.141–206.
14. Gatchev, V. A., Pulvino, T. and Tarhan, V. (2010). The Interdependent and Intertemporal Nature of Financial Decisions: An Application to Cash Flow Sensitivities. The Journal of Finance, 65(2), 725-763.
15. Gertler, M. and Gilchrist, S. (1994), Monetary Policy, Business Cycles, and the Behavior of Small Manufacturing Firms, The Quarterly Journal of Economics, 109(2), p.309–340.
16. Fazzari, S. M. and Petersen, B. C. (1993). Working Capital and Fixed Investment: New Evidence on Financing Constraints. The RAND Journal of Economics, 24(3), p.328–342.
17. Gertler, M. and Hubbard, R. G. (1988), Financial Factors in Business Fluctuations, A Symposium Sponsored by the Federal Reserve Bank of Kansas City, Federal Reserve Bank of Kansas City, Wyoming.
18. Gilchrist, S. and Himmelberg, C. P. (1995), Evidence on the role of cash flow for investment, Journal of Monetary Economics, 36(3), p.541–572.
19. Hadlock, C. J. and Pierce, J. R. (2010). New evidence on measuring financial constraints: Moving beyond the KZ index. The Review of Financial Studies, 23(5), p.1909–1940.
20. Hoshi, T., Kashyap, A. and Scharfstein, D. (1991), Corporate Structure, Liquidity, and Investment: Evidence from Japanese Industrial Groups, The Quarterly Journal of Economics, 106(1), p.33–60.
21. Ismail, M. A., Ibrahim, M. H., Yusoff, M. and Zainal, M.-P. (2010), Does Firm Size Matter for the Financial Constraints?, Jurnal Ekonomi Malaysia, 44(1), p.73–81.
22. Jensen, M. C. (1986), Agency Costs of Free Cash Flow, Corporate Finance, and Takeovers, The American Economic Review, 76(2), p.323–329.
23. Kadapakkam, P. R., Kumar, P. C. and Riddick, L. A. (1998), The Impact of Cash Flows and Firm Size on Investment: The International Evidence, Journal of Banking & Finance, 22(3), p.293–320.
24. Kaplan, S. N. and Zingales, L. (1997), Do Investment-Cash Flow Sensitivities Provide Useful Measures of Financing Constraints?, The Quarterly Journal of Economics, 112(1), p.169–215.
25. Kaplan, S. N. and Zingales, L. (2000), Investment-Cash Flow Sensitivities are not Valid Measures of Financing Constraints (Working Paper No. 7659), NBER.
26. Kashyap, A. K., Lamont, O. A. and Stein, J. C. (1994). Credit Conditions and the Cyclical Behavior of Inventories. The Quarterly Journal of Economics, 109(3), 565-592.
27. Laeven, L. (2003), Does Financial Liberalization Reduce Financing Constraints?, Financial Management, 32(1), p.5–34.
28. Meyer, J. and Kuh, E. (1955), Acceleration and Related Theories of Investment: An Empirical Inquiry, The Review of Economics and Statistics, 37(3), p.217–230.
29. Oliner, S. D. and Rudebusch, G. D. (1992), Sources of the Financing Hierarchy for Business Investment, The Review of Economics and Statistics, 74(4), p.643–654.
30. Richardson, S. (2006), Over-investment of free cash flow, Review of Accounting Studies, 11(2–3), p.159–189.
31. Schaller, H. (1993), Asymmetric Information, Liquidity Constraints, and Canadian Investment, The Canadian Journal of Economics, 26(3), p.552-574.
32. Schiantarelli, F. (1996), Financial Constraints and Investment: Methodological Issues and International Evidence, Oxford Review of Economic Policy, 12(2), p.70–89.
33. Tinbergen, J. (1938), Statistical Evidence on the Acceleration Principle, Economica, 5(18), p.164–176.
34. Whited, T. M. and Wu, G. (2006). Financial constraints risk. The Review of Financial Studies, 19(2), p.531–559.