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Cash flow sensitivities and the allocation of internal cash flow

Chang, Xin, Dasgupta, Sudipto, Wong, George and Yao, Jinquan 2014, Cash flow sensitivities and the allocation of internal cash flow, Review of financial studies, vol. 27, no. 12, pp. 3628-3657, doi: 10.1093/rfs/hhu066.

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Title Cash flow sensitivities and the allocation of internal cash flow
Author(s) Chang, Xin
Dasgupta, Sudipto
Wong, George
Yao, Jinquan
Journal name Review of financial studies
Volume number 27
Issue number 12
Start page 3628
End page 3657
Total pages 30
Publisher Oxford University Press
Place of publication Oxford, Eng.
Publication date 2014-09
ISSN 0893-9454
1465-7368
Keyword(s) cash flow
internal cash flow
transitory
savings
liquidity
Summary We study how firms allocate cash flow by estimating the cash-flow sensitivities of various uses of cash flow.We decompose cash flow into a transitory and a permanent component and focus on the allocation of the transitory component, which by construction contains little information about future growth opportunities. We find that more financially constrained firms allocate more transitory cash flow to cash savings and direct less toward investmentthan do less constrained firms, consistent with constrained firms accumulating liquidity to buffer against future financial constraints. We also illustrate several methodological advantages of our approach over alternative methods in previous studies
Language eng
DOI 10.1093/rfs/hhu066
Field of Research 150205 Investment and Risk Management
1402 Applied Economics
1502 Banking, Finance And Investment
1401 Economic Theory
Socio Economic Objective 970115 Expanding Knowledge in Commerce
HERDC Research category C1.1 Refereed article in a scholarly journal
ERA Research output type C Journal article
Persistent URL http://hdl.handle.net/10536/DRO/DU:30085864

Document type: Journal Article
Collection: Department of Finance
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