Faculty of Economics and Management
Universiti Kebangsaan Malaysia
43600 UKM Bangi, Selangor, MALAYSIA.
Faculty of Management and Muamalah
International Islamic University College Selangor
43000 Kajang, Selangor, MALAYSIA.
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.
Keywords
Citation
@article{ismail2015cash,
title={Cash Flow-Investment Relationship in Malaysia: A Panel Threshold Regression Analysis},
author={Mohd Adib, Mohd Adib and Yunus, Mawar Murni},
journal={Jurnal Pengurusan},
number={},
pages={49—59},
doi={},
publisher={Penerbit UKM},
}
Article received:
Accepted for publication:
Available online:
45 (2015) 49 – 59
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