Arbeitspapier
The effect of cash flow on investment: An empirical test of the balance sheet channel
This paper tests the balance sheet theory, where the status of balance sheets affects the economy's response to monetary and other shocks. The theory predicts a positive effect of cash flow on investment, given fundamental determinants of investment. I use an empirical method developed by Gilchrist and Himmelberg (1995, 1999), which has previously only been used to study very large, publicly traded firms. In contrast, this paper uses a large Swedish data set with many smaller firms, where balance sheet effects are likely to be especially important. I find that a firm's cash flow has a positive impact on its investment, controlling for any information in cash flow about investment opportunities. As predicted by the balance sheet channel, the estimated effect of cash flow on investment is especially large for firms which, a priori, are more likely to be financially constrained (low-dividend, small and non-group firms). Moreover, the investment-cash flow sensitivity is significantly larger and more persistent during the first half of the sample period, which includes a severe banking crisis and recession, than during the second half.
- Sprache
-
Englisch
- Erschienen in
-
Series: Sveriges Riksbank Working Paper Series ; No. 228
- Klassifikation
-
Wirtschaft
Multiple or Simultaneous Equation Models: Panel Data Models; Spatio-temporal Models
Investment; Capital; Intangible Capital; Capacity
Financial Markets and the Macroeconomy
- Thema
-
financial frictions
balance sheet channel
financial accelerator
investment
cash flow
Cash Flow
Bilanz
Investitionsentscheidung
KMU
Panel
Schweden
- Ereignis
-
Geistige Schöpfung
- (wer)
-
Melander, Ola
- Ereignis
-
Veröffentlichung
- (wer)
-
Sveriges Riksbank
- (wo)
-
Stockholm
- (wann)
-
2009
- Handle
- Letzte Aktualisierung
-
10.03.2025, 11:44 MEZ
Datenpartner
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. Bei Fragen zum Objekt wenden Sie sich bitte an den Datenpartner.
Objekttyp
- Arbeitspapier
Beteiligte
- Melander, Ola
- Sveriges Riksbank
Entstanden
- 2009
Ähnliche Objekte (12)
Household debt and monetary policy: Revealing the cash-flow channel
The use of cash and the size of the shadow economy in Sweden
Schweden, 1 Krone
Schweden, 1 Krone
Geldschein, 1 Krona, 1874
Geldschein, 1 Krona, 1914
The Swedish external position and the Krona
Estimating the Implied Distribution of the Future Short-Term Interest Rate Using the Longstaff-Schwartz Model
How important are financial frictions in the US and the Euro area
On the possibility of a cash-like CBDC
The monetary policy decision-making process and the term structure of interest rates
The interest rate effects of government bond purchases away from the lower bound
Household debt and monetary policy: Revealing the cash-flow channel
The use of cash and the size of the shadow economy in Sweden
Schweden, 1 Krone
Schweden, 1 Krone
Geldschein, 1 Krona, 1874
Geldschein, 1 Krona, 1914
The Swedish external position and the Krona
Estimating the Implied Distribution of the Future Short-Term Interest Rate Using the Longstaff-Schwartz Model
How important are financial frictions in the US and the Euro area
On the possibility of a cash-like CBDC
The monetary policy decision-making process and the term structure of interest rates
The interest rate effects of government bond purchases away from the lower bound
Household debt and monetary policy: Revealing the cash-flow channel
The use of cash and the size of the shadow economy in Sweden
Schweden, 1 Krone
Schweden, 1 Krone
Geldschein, 1 Krona, 1874
Geldschein, 1 Krona, 1914
The Swedish external position and the Krona
Estimating the Implied Distribution of the Future Short-Term Interest Rate Using the Longstaff-Schwartz Model
How important are financial frictions in the US and the Euro area
On the possibility of a cash-like CBDC
The monetary policy decision-making process and the term structure of interest rates