Investment-Cash Flow Sensitivities Are Very Probably Not Valid Measures of Financing Constraints

Released on by Javier Sánchez Vidal
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  • Investment-Cash Flow Sensitivities Are Very Probably Not Valid Measures of Financing Constraints Book Detail

  • Author : Javier Sánchez Vidal
  • Release Date : 2019
  • Publisher :
  • Genre :
  • Pages : 22
  • ISBN 13 :
  • File Size : 1,1 MB
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Investment-Cash Flow Sensitivities Are Very Probably Not Valid Measures of Financing Constraints by Javier Sánchez Vidal PDF Summary

Book Description: This experiment uses a Monte Carlo simulation designed to test whether the problems about the use of accounting identities are present in the model of Fazzari, Hubbard, and Petersen (1988). The Monte Carlo simulation creates 10,000 sets of randomly generated cash flows, Tobin's Q, and an error term variables, which in turn shape an investments variable that depends on them. These two variables are also related through an accounting semi identity or accounting partial identity (API). OLS estimations verify that estimated coefficients do not represent reality. The closer the data are to the accounting identity, the less the regression will tell about the causal relation.

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