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Cash Flow,Working Capital Change and Investment in China
Xiaodong Xu,
Shanghai Jiao Tong University
Jeong - Bon Kim, The Hong Kong Polytechnic University
Steven Wang, The Hong Kong Polytechnic University
ABSTRACT. In this paper, we investigate the effects of asymmetric information on the association between financing constraints and investment-cash flow sensitivities for listed Chinese firms We find that cash flow-investment sensitivities not only reflect the relation between a firm’s capital investment and investment in working capital, but also reflect the relation between cash flow from operations and capital investment. Investment of Chinese listed firms with more concentrated ownership, higher financial constraint scores, larger size and lower debt ratios display more sensitivity to working capital investment and cash flow from operations compared to other firms.
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