Cash flow-investment relationship in Malaysia: A panel threshold regression analysis

Mohd Adib Ismail, Mawar Murni Yunus

Research output: Contribution to journalArticle

Abstract

The objective of this article is to analyse the relationship pattern of cash flow-investment among low and high debt firms. To investigate the issue, we employed Hansen's (1999) threshold method of non-dynamic panel data. In this article, the firm debt ratio was used as threshold variable. A balanced panel data of companies listed on Bursa Malaysia, comprising of 234 companies for a period from 2004 to 2010, was utilized in this study. The results showed that debt ratio has a significant role at explaining the cash flow-investment relationship among firms. In particular, the results showed that low debt firms exhibit significant support to the financial constraints hypothesis, while high debt firms demonstrate support to the free-cash flow hypothesis. This finding explains why the cash flow-investment relationship of certain firms is negative, while other firms are positive. It also signifies the inability of constrained firms to access to external financing; thus, leading the firms to significantly rely on their internal financings.

Original languageEnglish
JournalJurnal Pengurusan
Volume45
Publication statusPublished - 2015

Fingerprint

Regression analysis
Threshold regression
Malaysia
Cash flow
Debt
Debt ratio
Panel data
External financing
Financing
Financial constraints
Listed companies
Free cash flow

Keywords

  • Cash flow
  • Investment
  • Non-dynamic panel
  • Threshold regression

ASJC Scopus subject areas

  • Business, Management and Accounting (miscellaneous)
  • Accounting
  • Business and International Management

Cite this

Cash flow-investment relationship in Malaysia : A panel threshold regression analysis. / Ismail, Mohd Adib; Yunus, Mawar Murni.

In: Jurnal Pengurusan, Vol. 45, 2015.

Research output: Contribution to journalArticle

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