Research On The Impact Of Profit Quality Characteristics On Investment Cash Flow Sensitivity

The report of the 19 th CPC National Congress proposed that "deepening the reform of the investment and financing system and giving play to the key role of investment in optimizing the supply structure." The source and distribution of funds by enterprises on different investment projects is a basic issue of enterprises' investment and financing.The adequacy of the internal capital of the enterprise will affect the investment expenditure,which is the investment cash flow sensitivity.The profit level is also an important reason that affects the internal capital adequacy of the company.That is,the profit quality will affect the investment cash flow sensitivity.In general,the profit quality is comprehensively reflected by different characteristics of profit quality,and the impact of different characteristics on investment cash flow sensitivity is also different.Only by deeply grasping how different characteristics of profit quality affect the investment cash flow sensitivity can we put forward a new way to solve the problem.Therefore,this paper discusses the impact of profit quality characteristics on investment cash flow sensitivity through literature review,theoretical analysis and empirical analysis,and statistical analysis,in order to alleviate the investment cash flow sensitivity.On the basis of detailed exploration of relevant research theories,this paper analyzes the impact of profit quality characteristics on investment cash flow sensitivity from the theoretical and empirical aspects respectively.In theoretical analysis,the characteristics of profit quality are manifested in five aspects: authenticity,realization,safety,persistence and growth.This paper analyzes the impact of profit quality characteristics on the sensitivity of investment cash flow,along with the financing constraints caused by information asymmetry and the abuse of free cash flow caused by agency conflict.In empirical analysis,this paper uses factor analysis to evaluate the profit quality characteristics through the index selection.At the same time,this paper uses the empirical models of Biddle and Hilary to measure the investment cash flow sensitivity.On the basis of this,this paper uses multivariate regression to further test the impact of profit quality characteristics on the sensitivity of investment cash flow.The results show that the profit authenticity,realization,safety,persistence and growth are negatively correlated with the investment cash flow sensitivity.Among them,the test of profit growth is not significant,and the regression coefficient of realization and authenticity profit is greater and the effect is more pronounced.This shows that the better the profit quality characteristics,the higher the quality of profits,the easier it is to ease the degree of information asymmetry,reduce the external financing costs,reduce the investment cash flow sensitivity induced by financing constraints.At the sametime,it is conducive to exerting the function of supervision of profit information,reducing agency costs,and mitigating agency conflicts,thereby reducing the investment cash flow sensitivity caused by excess free cash flow.Finally,based on the perspective of profit quality,this paper proposes a proposal to mitigate the investment cash flow sensitivity of enterprises from different profit quality characteristics.