Conference paper
Changing U.S. Economy and Investment–Cash Flow Sensitivity
Jun 2018
Abstract
The changes to the U.S. economy due to globalization, outsourcing, and the introduction of Nasdaq exchange have resulted in a decline in (i) the importance of manufacturing firms, (ii) capital expenditure as the main investment type, and (iii) operating cash flow as the primary source of internal capital to fund investment. To account for these changes, we broaden the definitions of (i) investment to include R&D, SG&A, cash used to fund subsidiaries, joint ventures, and purchase assets through M&A and (ii) internal capital to include cash holding available at the beginning of the year. We apply these innovations to the investment-cash flow-sensitivity literature. We find that this sensitivity is 570% higher than estimates from prior literature; it has declined modestly but has not disappeared, and is still large in recent years.
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Details
- Title
- Changing U.S. Economy and Investment–Cash Flow Sensitivity
- Creators
- Naveen D Daniel - Drexel University, FinanceLalitha Naveen - Temple UniversityJingbo Yu - Bank of America
- Conference
- The 2018 CityU of Hong Kong International Finance Conference on Corporate Finance and Financial Markets (City University of Hong Kong, Hong Kong, China, 05 Jun 2018 - 07 Jun 2018)
- Number of pages
- 59
- Resource Type
- Conference paper
- Language
- English
- Academic Unit
- Finance
- Identifiers
- 991021906509304721