Cash Flow Sensitivities of Financial Decisions: Evidence from an Emerging Market
This study investigates the sensitivity of financing, investment, and distribution decisions to changes in operating cash flow, and whether these sensitivities depend on whether or not firms are financially constrained. Using a sample of 2,650 firm-years of Turkish firms for the period 1996 to 2013,...
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| Veröffentlicht in: | Prague economic papers 2018, Vol.27 (5), p.554-572 |
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| container_title | Prague economic papers |
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| creator | Erdogan, Aysa Ipek |
| description | This study investigates the sensitivity of financing, investment, and distribution decisions
to changes in operating cash flow, and whether these sensitivities depend on whether or not
firms are financially constrained. Using a sample of 2,650 firm-years of Turkish firms for the period
1996 to 2013, we find that an increase in the short-term cash flows is associated with an increase
in cash balances, irrespective of whether or not firms are financially constrained. However,
unconstrained firms hold a larger cash balance than constrained firms. Dividends are positively
related to the short-term cash flows of both types of firms. Investments are not sensitive to cash
flow for either type of firms. An increase in their short-term cash flow induces the financially
constrained firms to reduce debt financing, but makes the unconstrained firms increase their debt
financing and reduce equity financing. Although firms in general prefer to use part of the saved
cash in the long term, they do not deplete their cash savings. Constrained firms resort to debt
financing in response to an increase in their long-term cash flow. |
| doi_str_mv | 10.18267/j.pep.675 |
| format | Article |
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to changes in operating cash flow, and whether these sensitivities depend on whether or not
firms are financially constrained. Using a sample of 2,650 firm-years of Turkish firms for the period
1996 to 2013, we find that an increase in the short-term cash flows is associated with an increase
in cash balances, irrespective of whether or not firms are financially constrained. However,
unconstrained firms hold a larger cash balance than constrained firms. Dividends are positively
related to the short-term cash flows of both types of firms. Investments are not sensitive to cash
flow for either type of firms. An increase in their short-term cash flow induces the financially
constrained firms to reduce debt financing, but makes the unconstrained firms increase their debt
financing and reduce equity financing. Although firms in general prefer to use part of the saved
cash in the long term, they do not deplete their cash savings. Constrained firms resort to debt
financing in response to an increase in their long-term cash flow.</description><identifier>ISSN: 1210-0455</identifier><identifier>EISSN: 2336-730X</identifier><identifier>DOI: 10.18267/j.pep.675</identifier><language>eng</language><publisher>Prague: Vysoká škola ekonomická v Praze</publisher><subject>Cash flow forecasting ; Companies ; Debt financing ; Economic models ; Economy ; Equity financing ; Financing ; Savings ; Short term ; Social Sciences</subject><ispartof>Prague economic papers, 2018, Vol.27 (5), p.554-572</ispartof><rights>Copyright University of Prague, Prague Economic Papers 2018</rights><lds50>peer_reviewed</lds50><oa>free_for_read</oa><woscitedreferencessubscribed>false</woscitedreferencessubscribed><citedby>FETCH-LOGICAL-c381t-4d3dd159d156c394905181f27d6c34a5de450b65847dd4fc76c0c218824e276a3</citedby><cites>FETCH-LOGICAL-c381t-4d3dd159d156c394905181f27d6c34a5de450b65847dd4fc76c0c218824e276a3</cites></display><links><openurl>$$Topenurl_article</openurl><openurlfulltext>$$Topenurlfull_article</openurlfulltext><thumbnail>$$Uhttps://www.ceeol.com//api/image/getissuecoverimage?id=picture_2018_43283.jpg</thumbnail><link.rule.ids>314,776,780,4009,27902,27903,27904</link.rule.ids></links><search><creatorcontrib>Erdogan, Aysa Ipek</creatorcontrib><title>Cash Flow Sensitivities of Financial Decisions: Evidence from an Emerging Market</title><title>Prague economic papers</title><addtitle>Prague Economic Papers</addtitle><description>This study investigates the sensitivity of financing, investment, and distribution decisions
to changes in operating cash flow, and whether these sensitivities depend on whether or not
firms are financially constrained. Using a sample of 2,650 firm-years of Turkish firms for the period
1996 to 2013, we find that an increase in the short-term cash flows is associated with an increase
in cash balances, irrespective of whether or not firms are financially constrained. However,
unconstrained firms hold a larger cash balance than constrained firms. Dividends are positively
related to the short-term cash flows of both types of firms. Investments are not sensitive to cash
flow for either type of firms. An increase in their short-term cash flow induces the financially
constrained firms to reduce debt financing, but makes the unconstrained firms increase their debt
financing and reduce equity financing. Although firms in general prefer to use part of the saved
cash in the long term, they do not deplete their cash savings. Constrained firms resort to debt
financing in response to an increase in their long-term cash flow.</description><subject>Cash flow forecasting</subject><subject>Companies</subject><subject>Debt financing</subject><subject>Economic models</subject><subject>Economy</subject><subject>Equity financing</subject><subject>Financing</subject><subject>Savings</subject><subject>Short term</subject><subject>Social Sciences</subject><issn>1210-0455</issn><issn>2336-730X</issn><fulltext>true</fulltext><rsrctype>article</rsrctype><creationdate>2018</creationdate><recordtype>article</recordtype><sourceid>REL</sourceid><recordid>eNpFkE1LAzEURYMoWGo3rl0E3AlT852MO6mtChUFFdwNMcnUjNPMmEwr_nuDLfjg8nhwuA8OAKcYTbEiQl420971UyH5ARgRSkUhKXo7BCNMMCoQ4_wYTFJqUB7BEeFkBJ5mOn3ARdt9w2cXkh_8Nscl2NVw4YMOxusW3jjjk-9CuoLzrbcuGAfr2K2hDnC-dnHlwwo-6PjphhNwVOs2ucl-j8HrYv4yuyuWj7f3s-tlYajCQ8EstRbzMkcYWrIScaxwTaTNJ9PcOsbRu-CKSWtZbaQwyBCsFGGOSKHpGJzvevvYfW1cGqqm28SQX1YEU4VkqbjM1MWOMrFLKbq66qNf6_hTYVT9SauaKkursrQMn-1h57r2v0_irIvQX2onZ50</recordid><startdate>2018</startdate><enddate>2018</enddate><creator>Erdogan, Aysa Ipek</creator><general>Vysoká škola ekonomická v Praze</general><general>Prague University of Economics and Business</general><general>University of Prague, Prague Economic Papers</general><scope>AE2</scope><scope>BIXPP</scope><scope>REL</scope><scope>AAYXX</scope><scope>CITATION</scope><scope>8BJ</scope><scope>FQK</scope><scope>JBE</scope></search><sort><creationdate>2018</creationdate><title>Cash Flow Sensitivities of Financial Decisions: Evidence from an Emerging Market</title><author>Erdogan, Aysa Ipek</author></sort><facets><frbrtype>5</frbrtype><frbrgroupid>cdi_FETCH-LOGICAL-c381t-4d3dd159d156c394905181f27d6c34a5de450b65847dd4fc76c0c218824e276a3</frbrgroupid><rsrctype>articles</rsrctype><prefilter>articles</prefilter><language>eng</language><creationdate>2018</creationdate><topic>Cash flow forecasting</topic><topic>Companies</topic><topic>Debt financing</topic><topic>Economic models</topic><topic>Economy</topic><topic>Equity financing</topic><topic>Financing</topic><topic>Savings</topic><topic>Short term</topic><topic>Social Sciences</topic><toplevel>peer_reviewed</toplevel><toplevel>online_resources</toplevel><creatorcontrib>Erdogan, Aysa Ipek</creatorcontrib><collection>Central and Eastern European Online Library (C.E.E.O.L.) (DFG Nationallizenzen)</collection><collection>CEEOL: Open Access</collection><collection>Central and Eastern European Online Library</collection><collection>CrossRef</collection><collection>International Bibliography of the Social Sciences (IBSS)</collection><collection>International Bibliography of the Social Sciences</collection><collection>International Bibliography of the Social Sciences</collection><jtitle>Prague economic papers</jtitle></facets><delivery><delcategory>Remote Search Resource</delcategory><fulltext>fulltext</fulltext></delivery><addata><au>Erdogan, Aysa Ipek</au><format>journal</format><genre>article</genre><ristype>JOUR</ristype><atitle>Cash Flow Sensitivities of Financial Decisions: Evidence from an Emerging Market</atitle><jtitle>Prague economic papers</jtitle><addtitle>Prague Economic Papers</addtitle><date>2018</date><risdate>2018</risdate><volume>27</volume><issue>5</issue><spage>554</spage><epage>572</epage><pages>554-572</pages><issn>1210-0455</issn><eissn>2336-730X</eissn><abstract>This study investigates the sensitivity of financing, investment, and distribution decisions
to changes in operating cash flow, and whether these sensitivities depend on whether or not
firms are financially constrained. Using a sample of 2,650 firm-years of Turkish firms for the period
1996 to 2013, we find that an increase in the short-term cash flows is associated with an increase
in cash balances, irrespective of whether or not firms are financially constrained. However,
unconstrained firms hold a larger cash balance than constrained firms. Dividends are positively
related to the short-term cash flows of both types of firms. Investments are not sensitive to cash
flow for either type of firms. An increase in their short-term cash flow induces the financially
constrained firms to reduce debt financing, but makes the unconstrained firms increase their debt
financing and reduce equity financing. Although firms in general prefer to use part of the saved
cash in the long term, they do not deplete their cash savings. Constrained firms resort to debt
financing in response to an increase in their long-term cash flow.</abstract><cop>Prague</cop><pub>Vysoká škola ekonomická v Praze</pub><doi>10.18267/j.pep.675</doi><tpages>19</tpages><oa>free_for_read</oa></addata></record> |
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| ispartof | Prague economic papers, 2018, Vol.27 (5), p.554-572 |
| issn | 1210-0455 2336-730X |
| language | eng |
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| source | Elektronische Zeitschriftenbibliothek - Frei zugängliche E-Journals |
| subjects | Cash flow forecasting Companies Debt financing Economic models Economy Equity financing Financing Savings Short term Social Sciences |
| title | Cash Flow Sensitivities of Financial Decisions: Evidence from an Emerging Market |
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