The impact of financial market imperfections on the investment – cash flow sensitivity in Slovak companies
The impact of financial market imperfections on the investment – cash flow sensitivity in Slovak companies

Author(s): Katarína Belanová
Subject(s): Business Economy / Management, Micro-Economics, Financial Markets
Published by: Masarykova univerzita nakladatelství
Keywords: investment; cash flow sensitivity; capital market imperfections; financial constraint;
Summary/Abstract: A company usually has get at least part of financing for investment projects from financial markets. If financial markets are perfect, the choice of the sources of finance does not influence investment decisions. Since financial markets are imperfect, companies find that external finance is costly or rationed. Especially small and medium – sized companies (SMEs) have difficulties in getting external financial sources. As a result, corporate investment is sensitive to the amount of internal funds. The aim of the article is to survey the impact of financial market imperfections on firm investment on the sample of 53 automotive companies in the SR. The survey was carried out during the year 2011. Using augmented accelerator model, we find supportive evidence for the fact that companies which are supposed to be more financially constrained exhibit greater investment – cash flow sensitivity. Our findings support the results of Fazzari et al. (1988) who also find that investment spending of firms with high levels of financial constraints is more sensitive to the availability of cash flow

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