Corporate governance and investment-cash flow sensitivity: Evidence from emerging markets
Abstract
Controlling for country-level governance, we investigate how firms' corporate governance influences financing constraints. Using firm-level corporate governance rankings across 14 emerging markets, we find that better corporate governance lowers the dependence of emerging market firms on internally generated cash flows, and reduces financing constraints that would otherwise distort efficient allocation of investment and destroy firm value. Additionally and more importantly, firm-level corporate governancematters more significantly in countries with weaker country-level governance. This suggests substitutability between firm-specific and country-level governance in determining a firm's investment sensitivity to internal cash flows.
Keywords:
Corporate governance, Emerging markets, Investment–cash flow sensitivity
- Introduction
- Related literature and hypotheses development
- Corporate governance and investment–cash flow sensitivity
- Relative importance of firm-level and country-level governance
- Data
- Sample
- Summary statistics
- Methodology and results
- Baseline regression
- Two-stage regression
- Cash flow sensitivity of cash
- Growth in debt financing
- Conclusion
- Appendix A. Variable definitions and sources
- References
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جمعه, 07 آبان 1395 21:56

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