Listed Companies In China Investment And Internal Cash Flow Sensitivity Of Empirical Research

The topic of the relationship between investment and cash flow has already become the focus discussed in recent years. Generally speaking, the fluctuation of the cash flow will influence the scale of investment of the company, with the internal cash flow decreasing, the investment of the company will be reduced, and vice visa.In the imperfect capital market, the enterprises will be restrained from outside financing due to the financing constraint that is caused by the cost difference of the outside financing and inside financing. As the outside financing cost is greater than the inside financing cost, the enterprises will have a partiality for the inside financing with lower cost for the investing project. The more the outside financing of the enterprises is constrained, the more the enterprises have the partiality of using inside financing.The paper uses internal cash flow to reflect the internal financing ability, and analyzes the investment-cash flow sensitivity when enterprises facing various degrees of finance constraints. The paper combines the theory analysis with empirical study, analyses the relationship between investment and internal cash flow theoretically, and relies on the financial data to establish the concrete indexes about the internal cash flow and investment. It selects the listed companies of Shanghai and Shenzhen stock markets from 2000 to 2003 as samples, employs the dividend payout and times interest earned respectively as the standard of financing constraint grouping to test the relationship between the investment and internal cash flow, as well as the relationship of financing constraints and investment-cash flow sensitivity. The purpose is to disclose the impact of the internal cash flow fluctuation on the investment activities of enterprises in face of various degrees outside financing. Two conclusions can be drawn from the empirical study:(1)There is a remarkable investment-cash flow sensitivity existing in the listed company of our country, which is increasing with the lapse of time. It proves that the risk that the fluctuation of the internal cash flow brings to the investment activity is strengthened gradually.(2)The sensitivity of investment to the internal cash flow is increasing with the increasing outside financing constraints, which proves that the financing constraint can be used to explain the relation of investment and internal cash flow.