Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
5087263 | Journal of Asian Economics | 2015 | 11 Pages |
Abstract
We find that the cash flow sensitivity of investment and cash holdings rises as bank health deteriorates. Moreover, the impact of non-performing loans on the cash flow sensitivity is more prevalent across firms in economies with a higher level of financial intermediary development. As financial intermediaries develop, firms become more dependent on bank credit and bank-dependent firms are more vulnerable to external shocks hitting the financial system. Therefore, when bank health is impaired, bank-dependent firms increase their reliance on internal funds and raise their propensity to save out of cash flow to materialize profitable investment opportunities in the future.
Related Topics
Social Sciences and Humanities
Economics, Econometrics and Finance
Economics and Econometrics
Authors
Kazuo Ogawa,