Financial constraint measurements, cash flow sensitivity and financial flexibility management

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  • 財務制約，キャッシュフロー感応度と財務的柔軟性

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Firms can miss out on investment opportunities owing to cash shortfalls. This is solved by accumulating cash holdings among other strategies. Examining the validity of financial constraint measurements involved in this financial flexibility management is a valid topic of research, especially in the Japanese context. This study investigates the applicability of the various measurements, some of which are included in classic empirical models together with the cross-term of cash flow. Our regression results show that payout payment dummy has explanatory power over changes in cash holdings, while the KZ index is more applicable for cash holding determinants and the cash flow sensitivity of investments analysis. Financially constrained firms appear to save more from cash flow and have greater reliance on internal cash flow for investment than their unconstrained counterparts. This study also provides evidence of Japanese firms’ precautionary motive for accumulating cash holdings.

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