محدودیت‌های مالی و حساسیت سرمایه‌گذاری به جریان‌های نقدی در بورس اوراق بهادار تهران

Journal of Accounting Advances (J.A.A)
Vol. 2, No. 2, Fall & Winter 2010, Ser. 59/3
 
 
Extended Abstract
 
Financial Constraints and Investment-Cash Flow Sensitivity in Tehran Stock Exchange
 
Dr. M. Kashanipoor              Dr. S. Rasekhi
B. Naghinejad                 A. Rasaiian
Mazandaran University
 
Introduction
       In recent years, the subject of investment-cash flow sensitivity has been an important and controversial issue among researchers. They argued that financially constrained firms have a larger cost differential between internal and external funds and hence rely more on internal cash for making investments (Arsalan et al, 2006). This paper investigates the investment-cash flow sensitivity and the role of cash holding on reducing this sensitivity in an emerging market, named Tehran stock exchange (TSE). This paper contributes to the development of empirical literature on several grounds:
       1.We use variety proxies (firm size, firm age, dividend payout ratio, business group, financial leverage, percentage of block holders ownership, cash holding and optimal cash model (dynamic model)) as financially constrains agency. From this viewpoint, our work is similar to (Arsalan et al, 2006).
       2. We use panel data (fixed effects model) to estimate investment model instead of cross-sectional analyses. Because we believe that cross-sectional, analyses may reduce variation in variables, and consequently yield poor results.
       3. Iranian firms, apart from US, UK, or other developed countries firms, are facing with tighter financial constraints. The TSE is a small market and advanced financial instruments such as options, and futures do not exist in it so far and the place and role of information intermediaries such as financial analysts, industry experts and the financial presses feel is empty in the capital market mechanism. These conditions appear to be good opportunities for studying the impact of financial constraints on cash flow sensitivity of investment.
 
Research Questions or hypothesis
       In the absence of capital market imperfections, there are accurate substitutions between internal and external funds and all firms have equal access to external funds. However, for existence of capital market imperfections (information asymmetry and agency conflicts), the costs of internal financing and external financing are different. High wedge between the costs of internal and external financing may lead firms to rely more on internal cash flows for investment financing. The question of this research is:
       Do financially constrained firms have a larger Investment-Cash Flow Sensitivity than unconstrained firms in Tehran Stock Exchange do?
The research hypothesis is as follows:
       Financially constrained firms have a larger Investment-Cash Flow Sensitivity than unconstrained firms do in Tehran Stock Exchange. The period of research is years 1381-1387.
 
Methods
       The measure has been used in the literature to assess the degree of financial constraints experienced by firms is the sensitivity of investments to availability of internal funds, after controlling for investment opportunities as measured by Tobin’s Q (Hovakimian,2010). Consequently, investment model is defined under a linear model to determine financial constraints effects on the cash flow sensitivity of investment.
(1)                                                                    
       INV is the ratio of capital expenditures in the fixed assets to net fixed assets at the beginning of period. CFLOW is the ratio of operating cash flows to net fixed assets at the beginning of period. Q represents growth opportunities measured by the ratio of book value of total liabilities plus market value of equity to book value of total assets. In the perfect capital markets, the coefficient of CFLOW must be insignificant and the coefficient of Q must be significant (Kadapakkam et al, 1998). The positive and significant coefficient for CFLOW interpreted as instances of financial constraints. Financial constraints defined as firms that have restrictive and costly access to external capital markets. As result, financially constrained firms have to rely more on internal funds for making investment (Hovakimian and Hovakimian, 2009). In contrast, financially unconstrained firms have unrestrictive access to capital markets and their external financing costs are tiny. NFC firms do not rely on internal funds for investment making. Then, the first hypothesis is defined as follows: financial constraints (FC) firms have higher investment-cash flow sensitivity than non-financial constraints (NFC) firms. For testing, the above hypothesis, all firms in the sample, were separated into two groups, named, FC and NFC.
       Then the investment model (model 1) runs in two groups, separately (George et al, 2008).
       Model (1) is examined based on optimal cash model. Optimal cash model is specified as follows:
 
       Firm size: Following Arsalan et al (2006) and Kadapakkam et al (1998) among others, we rank firms on the basis of firm size (measured by natural logarithm of book value of total assets) and assigned to FC (NFC) group those firms whose sizes fall below (above) the median size in the sample. The main argument here is that smaller firms have higher information asymmetry and agency conflicts than larger firms.
       FIRM AGE: Older firms have an established reputation in the market, which facilitates their access to external finance, mainly because their relationships with creditors settled within a longer time span. Moreover, there is a positive relationship between size and age. We rank firms on the basis of firm age (measured by the number of years that have elapsed from the firm's establishment date) and assigned to FC (NFC) group those firms whose age lies below (above) the median age in the sample (George et al, 2008).
       Dividend payout ratio: The argument that firms with higher dividend payout ratios can cut dividends in financial distresses and use it for internal financing. However, in using this proxy caution must keep, since cutting of dividends may hurt the firm's reputation and reduce the market value of equity. Dividends may be regard as an efficient instrument to mitigate managers – shareholders conflict. Dividends reduce free cash flow and force the firm to attract capital from external sources. Dividend payout ratio measured by dividend payments to book value of total assets at the beginning of period. We rank firms on the basis of dividend payout ratio and assigned to FC (NFC) group those firms whose dividend payments lies below (above) the median dividend payout ratio in the sample.
       Business Group: The main argument is that group membership in financial distresses helps the poor membership. Intra-group loans are an important means of transferring cash across group firms and typically used to support financially weaker firms. They argued that the main reason for these financial aids might be to avoid default by a group firm and consequent negative spillovers to the rest of the group. Affiliated firms in comparison with stand-alone firms are less prone to bankruptcy and experiences of financial distresses. The reasons for this claim retrieved from some features of affiliated firms. First, banks and other financial institutions may be more willing to lend to firms that belong to a business group. Second, diversified nature of business groups may cause risk sharing and hence, the cost of external financing will be low. Third, group name can play valuable role (reputation effects). Fourth, intra-group capital markets may look as cheap market for external financing. Economists who have studied business groups have tended to emphasize that group affiliates linked together through equity cross-ownership patterns (George et al, 2008).
       Financial leverage: The argument is that firms with higher financial leverage ratios had to use internal financing (George et al, 2008).
Ownership Structure (Percentage of block holders ownership): The argument is that firms with lower Percentage of block holders ownership have financial constrains (George et al, 2008).
       Cash holding: There are various explanations for the question why firm hold large amounts of cash and cash equivalents. The assumption of no financial frictions is unrealistic. The capital market imperfections (information asymmetry and agency conflicts) impose severe external financing costs to the firms. As a result, firms hold large amounts of cash balances for minimizing financing costs. However, holding of large cash balances may cause agency conflicts between managers and shareholders with respect to the free cash flow theory (Almeida et al, 2004).
Cash flows are measured using operating cash flows obtained from cash flow statement.
 
Results
       This study utilized financial information of 96 firms of Tehran Stock Exchange during 1381 to 1387. Results show that financial constraints firms have higher investment-cash flow sensitivity than the other firms do. In other words, financial constraints firms, in investment making decisions rely highly on internal cash flows.
Discussion and Conclusion
       This paper presents a wide literature in the field of the cash flow sensitivity of investment and the hedging role of cash holding. Our findings show that the cash flow sensitivity of investment in the financially constrained firms is higher than in the unconstrained firms. It seems that firm size, firm age, dividend payout ratio, financial leverage, percentage of block holders ownership and business group proxies are accurate agencies of financial constraint existence according to theories. Moreover, the results show that using cash holding and optimal cash model as a financially constrained agency prudence are not forgotten. It is appropriate to suppose that cash holding acts in the opposite direction of size, age, dividend and business group proxies. In addition, we found cash holding could not reduce the effect of capital market imperfections on investment-cash flow sensitivity. Firms with restricted access to capital markets and high costs of external financing save a high portion of assets in cash but this strategy has failed to reduce financial constraints' effects on investment-cash flow sensitivity.