Investment、Cash Flow And Government Control

In this paper, The relationship between internally generated cash flows and fixed asset investment of more than 500 listed companies of manufacturing industry in Shanghai and Shenzhen Stock Exchange between 2006 and 2012 is investigated and found that is U-shaped. The relationship between cash flow and investment are negative for low levels of cash flow. However, the relationship between cash flow and investment are positive for high levels of cash flow. We also find government controlled listed firms have greater investment-cash flow sensitivities than do privately controlled listed companies on the left-hand side of the U-shaped curve where cash flow is negative. However, privately controlled listed companies have greater investment-cash flow sensitivities than do government controlled listed firms on the right hand side of the U-shaped curve where cash flow is positive.