Is cash flow important in explaining investment dynamics? A large body of empirical work argues that it is. This finding is further taken as evidence of capital market imperfections. We argue that time-to-build for capital projects creates an investment cash flow sensitivity as found in...

A large body of empirical work has established the significance of cash flow in explain- ing investment dynamics. This finding is further taken as evidence of capital market imperfections. We show, using a perfect capital markets model, that time-to-build for capital projects creates an...

Focusing on a panel of unlisted firms from transition economies, we observe that only firms facing low irreversibility exhibit high and significant investment-cash flow sensitivities. Our findings provide a new explanation for why some financially constrained firms may exhibit low sensitivities.

A large body of empirical work has established the signi¯cance of cash flow in explain- ing investment dynamics. This finding is further taken as evidence of capital market imperfections. We show, using a perfect capital markets model, that time-to-build for capital projects creates an...

Using a panel of 4223 Bulgarian, Czech, Polish, and Romanian firms, over the period 1998-2005, we show that financially constrained firms likely to face irreversibility constraints exhibit low and insignificant sensitivities of investment to cash flow. These firms typically use their cash flow...

This paper uses a panel of 24184 UK firms over the period 1993-2003 to study the extent to which the sensitivity of investment to cash flow differs at firms facing different levels of internal and external financial constraints. Our results suggest that when the sample is split on the basis of...