| Summary: | 碩士 === 銘傳大學 === 金融研究所 === 88 === The purpose of this paper is to investigate the relationship between investment decision and internal cash flow across different groups of firms. Using data from manufacturing firms listed in Taiwan Stock Market during the period 1993 — 1998, and classifying firms according to the dividend policies (both of cash and cash-stock dividend) and 10 selected financial ratios that are related to financing constraint and financial status, the regression model of investment developed by Fazzari, Hubbard & Petersen(1988) is employed.
To compare the investment—cash flow sensitivity across different groups of firms, we applied a bootstrap methodology to determine significance levels of observed difference in coefficients estimated from the above regression model. It should be emphasized that this approach would improve the conclusions over previous studies.
This study concluded as follows: (1) the relationship between investment decision and both of invest opportunity and internal cash flow are positive; (2) firms with less financing constraint exhibit significantly greater sensitivities than those which are more financing constrained, similar to the conclusion of Kaplan & Zingales(1997); (3) the relationship between investment decision and investment opportunity isn’t significantly different across different financing constrained firms; (4) dividend policies(both of cash and cash-stock dividend) could be interpreted as a measurement of financing constraint.
Key words: Financial constraint, internal cash flow, investment, discriminant, bootstrap
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