Investigating the relationship between free cash flow, investment sensitivity and the moderating role of financial constraints

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Modanloo Fatemeh; Naderian Arash; KHOZEIN ALI; GORGANLIDAVAJI JOMADOORDI

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Journal: Financial Economics Year:2022 | Volume:15 | Issue:4 (57) Page(s): 309-331

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Title

Investigating the relationship between free cash flow, investment sensitivity and the moderating role of financial constraints

Author(s)

Modanloo Fatemeh | Naderian Arash | KHOZEIN ALI | GORGANLIDAVAJI JOMADOORDI | Issue Writer Certificate

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Abstract

One of the topics well dealt with in the theoretical foundations of financial economics is the sensitivity of investment costs to cash flow. The extent to which a company relies on internal resources is determined by the investment's sensitivity to its cash flow. Therefore, the purpose of this study was to investigate the relationship between free cash flow and investment sensitivity with respect to the moderating role of financial constraint in listed companies in Tehran Stock Exchange. The sample companies in this study included 125 companies listed in Tehran Stock Exchange during the years 2012 to 2016. In this regard, there are three hypotheses that there is a significant relationship between free cash flow and investment sensitivity as well as examining the moderating role of financial constraint in the next hypothesis and also in firms that are expected to suffer more financial constraint, investment sensitivity is less than Free cash flow is not higher. Data were analyzed using linear and logistic regression statistical techniques with Eviews software. The results show that there is not only positive and significant relationship between free cash flow and investment sensitivity; The financial constraint also moderates the relationship between free cash flow and investment sensitivity, and in firms that are expected to suffer greater financial constraints, investment sensitivity is not lower than higher free cash flow.

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APA: Copy

Modanloo, Fatemeh, Naderian, Arash, KHOZEIN, ALI, & GORGANLIDAVAJI, JOMADOORDI. (2022). Investigating the relationship between free cash flow, investment sensitivity and the moderating role of financial constraints. JOURNAL OF FINANCIAL ECONOMICS (FINANCIAL ECONOMICS AND DEVELOPMENT), 15(4 (57) ), 309-331. SID. https://sid.ir/paper/416098/en

Vancouver: Copy

Modanloo Fatemeh, Naderian Arash, KHOZEIN ALI, GORGANLIDAVAJI JOMADOORDI. Investigating the relationship between free cash flow, investment sensitivity and the moderating role of financial constraints. JOURNAL OF FINANCIAL ECONOMICS (FINANCIAL ECONOMICS AND DEVELOPMENT)[Internet]. 2022;15(4 (57) ):309-331. Available from: https://sid.ir/paper/416098/en

IEEE: Copy

Fatemeh Modanloo, Arash Naderian, ALI KHOZEIN, and JOMADOORDI GORGANLIDAVAJI, “Investigating the relationship between free cash flow, investment sensitivity and the moderating role of financial constraints,” JOURNAL OF FINANCIAL ECONOMICS (FINANCIAL ECONOMICS AND DEVELOPMENT), vol. 15, no. 4 (57) , pp. 309–331, 2022, [Online]. Available: https://sid.ir/paper/416098/en

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