Downloads
kz_paper.pdf
PDF | 517.03 KB
Kaplan and Zingales (QJE, 1997) study the unconditional sensitivity of investment to cash flow in a static demand for capital framework. We study the sensitivity of investment to cash flow conditional on measures of q in an adjustment costs framework, which is more closely related to the empirical literature on investment and financing constraints. We present a benchmark
model in which this conditional investment-cash floow sensitivity increases monotonically with the cost premium for external finance, for firms in a financially constrained regime. Using simulated data, we show that this pattern is found in the standard linear specification that relates investment rates to measures of both cash flow and average q.
Authors
Stephen Bond
Måns Söderbom
Report details
- Publisher
- IFS
Suggested citation
Bond, S and Söderbom, M. (2006). Conditional investment-cash flow sensitivities and financing constraints. London: IFS. Available at: https://ifs.org.uk/publications/conditional-investment-cash-flow-sensitivities-and-financing-constraints (accessed: 3 July 2024).
More from IFS
Understand this issue
Where next for the state pension?
presentation
IFS researchers presented findings from a major new report on the future of the state pension in the UK, published as part of the Pensions Review.
13 December 2023
Social mobility and wealth
presentation
IFS researchers shared findings from ESRC-funded research on social mobility and its drivers.
12 December 2023
Autumn Statement 2023: IFS analysis
presentation
IFS researchers presented their analysis of the Chancellor's announcements the day after the Autumn Statement.
23 November 2023
Policy analysis
How would the parties’ tax and spending plans affect Scotland and Wales?
report
This ‘explainer’ looks at how the parties’ proposals would affect Scotland and Wales, covering tax, spending, public finances and the constitution.
28 June 2024
General Election 2024: Manifesto Analysis Presentations
presentation
IFS researchers presented their analysis of the manifestos ahead of the 2024 general election.
24 June 2024
How do the last five years measure up on levelling up?
report
How well – or badly – has the UK fared on the 12 levelling up missions? We examine early progress and the scale of the challenge ahead.
19 June 2024
Academic research
The impact of labour demand shocks when occupational labour supplies are heterogeneous
working paper
We study the heterogeneous impact of subsequent demand shifts on wages and employment in Germany.
28 June 2024
The impact of flexibility at work on fertility
working paper
Using the increase in work flexibility during the first Covid-19 lockdown, we find a significant and persistent increase in births nine months later.
11 June 2024
Intergenerational mobility in socio-emotional skills
working paper
This paper investigates the intergenerational transmission of socio-emotional skills during childhood, using the 1970 British Cohort Study in the UK.
5 June 2024