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Chinese Manufacturing Listed Company Investment Spending And Internal Cash Flow Sensitivity

Posted on:2006-08-18Degree:MasterType:Thesis
Country:ChinaCandidate:J G HanFull Text:PDF
GTID:2209360182968766Subject:Technical Economics and Management
Abstract/Summary:PDF Full Text Request
Research on the investing activities of the corporate under the condition of asymmetry information is one of the most important issues in today's corporate financial policy research. Owing to the difference between internal and external financing cost, corporate prefers to finance internally. As for the reason why the ability to finance internally influences investing activities of the corporate, there are 2 kinds of explanations in the academic sphere, that is, external Financing Constraint Hypothesis associated with underinvestment, and Free-Cash-Flow agency cost Hypothesis indicating overinvestment.The paper combines theoretical analysis with empirical research, and respectively makes internal cash flow and investment expenditure as the embodiment of internal financing ability and investing activities of the corporate. On the basis of defining the two factors, the paper makes a theoretical analysis of the relationship between investment expenditure and internal cash flow, and set the target according to financial statistics. Then, it investigates the influence of internal cash flow fluctuation on the change of investment expenditure and the reason for the influence, with the listed manufacturing companies of A stock share in hu and shen from 1999-2004 as the sample and corporate size ,overall financial position, industry characteristic, equity structure as the classification standard. Here are some conclusions from the research:(1) Generally speaking, the increase of internal cash flow in Chinese manufacturing companies can greatly promote the growth of investment expenditure.(2) The sensitive relationship between investment expenditure and internal cash flow in Chinese manufacturing companies deteriorates with the expansion of the companies, and shows a U-changing tendency with the lengthening of industry cycle, and demonstrates a inverse-U-tendency with the improvements of the companies' overall financial position and the growth of state—owed shares percentage.(3) The dynamic analysis of the sensitive relationship betweeninvestment expenditure and internal cash flow in Chinese manufacturing companies shows that: taking size into account, investing activities of small companies tend to support external financing constraint assumption, while those of large companies support free cash flow agency cost assumption; Taking the overall financial position into account, the investing activities of companies with worse position tend to support free cash flow agency cost assumption, while those of companies with better position tend to support external financing constraint assumption; Taking the industry characteristics into account, the investing activities of the growing industries tend to support external financial assumption, while those of the deteriorating companies tend to support free cash flow agency cost assumption; Taking the equity structure into account, the investing activities of non-state-owed companies tend to support external financing constraint assumption, while those of the absolute-state-owed companies tend to support free cash flow agency cost assumption.
Keywords/Search Tags:investment expenditure, internal cash flow, financing constraint, free cash flow agency cost
PDF Full Text Request
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