Investment-Cash Flow Sensitivities are Useful: A Comment on Kaplan and Zingales

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2000
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Abstract
A recent paper in this Journal by Kaplan and Zingales reexamines a subset of firms from work of Fazzari, Hubbard, and Petersen and criticizes the usefulness of investment-cash flow sensitivities for detecting financing constraints. We show that the Kaplan and Zingales theoretical model fails to capture the approach employed in the literature and thus does not provide an effective critique. Moreover, we describe why their empirical classification system is flawed in identifYing both whether firms are constrained and the relative degree of constraints across firm groups. We conclude that their results do not support their conclusions about the usefulness of investment-cash flow sensitivities.
Reference Key
openalex_W2136456638 Use this key to autocite in the manuscript while using SciMatic Manuscript Manager or Thesis Manager
Authors Steven M. Fazzari, R. Glenn Hubbard, Bruce C. Petersen
Journal the quarterly journal of economics
Year 2000
DOI
10.1162/003355300554773
URL
https://doi.org/10.1162/003355300554773
Keywords Keywords not found

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