China's Investment Behavior Of Listed Companies Cash Flow Sensitivity Of The Empirical Analysis

This paper studies the listed A share-enterprises excluding those in the financial sector on the Shanghai and Shenzhen Stock Exchanges in2002-2010; utilizes the method that Michael Firth (2012) used in the study of investment-cash flow relation of Chinese listed enterprises in manufacturing industry; aims to examine whether the U-shape investment-cash flow relation exists in enterprises of all industries besides manufacturing industry. The empirical results found that Chinese listed enterprises’investment-cash flow relation was like a U-shape curve, and the investment-cash flow sensitivity of government controlled enterprises is greater than that of non-government-controlled enterprises, especially when cash flow is negative, which is due to the extent of financial constraint is lower for government-controlled enterprises than that of non-government-controlled enterprises. In addition, monetary policy will impact on enterprises’investment, when monetary policy is tightening, government-controlled enterprises’investment decreases less than that of non-government-controlled enterprises; when monetary policy is easing, government-controlled enterprises’investment increases significantly, by contrast non-government-controlled enterprises’investment has no obvious rise, which further illustrates it is due to financial constraint that investment-cash flow sensitivity of government-controlled enterprises is greater than that of non-government controlled enterprises.