Quotation Gugler, Klaus. 2003. Corporate Governance and Investment. International Journal of the Economics of Business 10 (3): 261-289.




This paper contributes at least threefold to the investment-cash flow literature. First, it finds that the corporate governance environment of a firm affects the relationship between investment and cash flow. Second, we allow for both asymmetric information and managerial discretion explanations for positive investment-cash flow coefficients, thereby overcoming most of the ambiguities in this interpretation. Finally, by using a GMM estimator we avoid most of the problems with traditional OLS models. We find that family-controlled firms appear to suffer from cash constraints as evidenced by a positive and robust relationship of investment to cash flow. State-controlled firms also exhibit a positive and significant cash flow sensitivity, which we explain by managerial discretion.


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Publication's profile

Status of publication Published
Affiliation WU
Type of publication Journal article
Journal International Journal of the Economics of Business
WU-Journal-Rating new FIN-A, STRAT-C
Language English
Title Corporate Governance and Investment
Volume 10
Number 3
Year 2003
Page from 261
Page to 289


Gugler, Klaus (Details)
Research Institute for Regulatory Economics FI (Details)
Department of Economics (Gugler) (Details)
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