The effects of financial constraints on corporate policies in Australia

Zhang, Hongfeng, Chang, Xin, Tan, Tek Jun and Wong, George 2007, The effects of financial constraints on corporate policies in Australia, Accounting and finance, vol. 47, no. 1, pp. 85-108.

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Title The effects of financial constraints on corporate policies in Australia
Author(s) Zhang, Hongfeng
Chang, Xin
Tan, Tek Jun
Wong, George
Journal name Accounting and finance
Volume number 47
Issue number 1
Start page 85
End page 108
Publisher The Association
Place of publication Clayton, Vic.
Publication date 2007-02-27
ISSN 0810-5391
Keyword(s) financial constraints
cash policy
Australian firms
Summary We jointly study the impact of financial constraints on Australian companies' investment decisions and demand for liquidity. By examining a large sample of Australian firms over the period 1990–2003, we find that financial constraints not only reduce the sensitivity of investment to the availability of internal funds, but also increase the responsiveness of cash holdings to internally generated cash flows. Further analysis shows that the impact of financial constraints varies across different cash flow states; that is, financial constraints have a small effect on corporate investment and cash policies when cash flows are positive. In contrast, the severity of constraints is high in negative cash flow years in which the cost disadvantage of external finance coincides with deteriorating operating performance.
Language eng
Field of Research 150103 Financial Accounting
150101 Accounting Theory and Standards
150303 Corporate Governance and Stakeholder Engagement
Socio Economic Objective 970115 Expanding Knowledge in Commerce, Management, Tourism and Services
HERDC Research category C1.1 Refereed article in a scholarly journal
Copyright notice ©2009, Accounting and Finance Association of Australia and New Zealand
Persistent URL http://hdl.handle.net/10536/DRO/DU:30019919

Document type: Journal Article
Collection: School of Accounting, Economics and Finance
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