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Cash flow and growth considering different ownership structure

Cash flow and growth considering different ownership structure Purpose – The purpose of this paper is to examine the effect of financial constraints on firm growth considering six types of ownership structure. According to the theory of financial management and asymmetric information theory, external funds are costly for small firms. However, some ownership structures may alleviate cash flow‐growth sensitivity. The paper considers different types of ownership structure to study cash flow‐growth relation and its sensitivity. Design/methodology/approach – Results are drawn from a dynamic panel data model under the two specific empirical models. Those designs can capture important empirical meanings. Findings – The sensitivity of growth to cash flow decreases significantly when managers control larger proportions of a firm's stock and when a firm belongs to a conglomerate. The findings also show that small and young firms grow faster. R&D and advertising expenditures also motivate a firm's growth, as do profitability and abundant cash flow. Originality/value – This paper uses a dynamic panel data model to investigate the effect of cash flow on firms' growth under six types of ownership structure. The sensitivity analysis of growth to cash flow provides new results for traditional literature. In fact, different ownership structures lead to distinct cash flow‐growth sensitivity. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Modelling in Management Emerald Publishing

Cash flow and growth considering different ownership structure

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References (34)

Publisher
Emerald Publishing
Copyright
Copyright © 2014 Emerald Group Publishing Limited. All rights reserved.
ISSN
1746-5664
DOI
10.1108/JM2-04-2011-0028
Publisher site
See Article on Publisher Site

Abstract

Purpose – The purpose of this paper is to examine the effect of financial constraints on firm growth considering six types of ownership structure. According to the theory of financial management and asymmetric information theory, external funds are costly for small firms. However, some ownership structures may alleviate cash flow‐growth sensitivity. The paper considers different types of ownership structure to study cash flow‐growth relation and its sensitivity. Design/methodology/approach – Results are drawn from a dynamic panel data model under the two specific empirical models. Those designs can capture important empirical meanings. Findings – The sensitivity of growth to cash flow decreases significantly when managers control larger proportions of a firm's stock and when a firm belongs to a conglomerate. The findings also show that small and young firms grow faster. R&D and advertising expenditures also motivate a firm's growth, as do profitability and abundant cash flow. Originality/value – This paper uses a dynamic panel data model to investigate the effect of cash flow on firms' growth under six types of ownership structure. The sensitivity analysis of growth to cash flow provides new results for traditional literature. In fact, different ownership structures lead to distinct cash flow‐growth sensitivity.

Journal

Journal of Modelling in Management – Emerald Publishing

Published: Mar 11, 2014

Keywords: Management; Economics; Finance

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