Leverage and Investment Cash Flow Sensitivity

Evidence from Muscat Securities Market in Oman

Bibliographic Data

ID3390305
AuthorsIlker Yilmaz (0000-0001-8501-9664, Dhofar University, corresponding author)
Year2022
Volume12
Issue3
Publication date2022-07-01
Peer ReviewedYes
Open AccessYes
TypeARTICLE
VenueSAGE Open (JOURNAL)
Journal identifiersISSN: 2158-2440 • E-ISSN: 2158-2440
PublisherSAGE Publications Inc (PUBLISHER)
DOI10.1177/21582440221119487
OpenAlexW4292553123
LanguageEN
Citations received1
References cited54

This article investigates the investment cash flow sensitivity (ICFS) and the effect of leverage on the firms' ICFS by using data from 66 non-financial companies from Muscat Securities Market, Oman for a 7-year period from 2013 to 2019. We used a dynamic panel investment model based on the Euler equation approach and ran dynamic panel regressions using the dynamic panel system generalized method of moments (GMM). We run two regressions: first, testing the sensitivity of investment to the availability of the internal funds; second, testing the effect of firms' leverage levels on the sensitivity of investment to cash flows. The results showed a significant sensitivity of investment to cash flows for the sample companies. The positive coefficient for the cash flow variable indicates the presence of financing constraints. The results showed that leverage has a significant effect on the ICFS of the companies, indicating that the companies with higher leverage have ICFS

Business · Cash flow · Econometrics · Economics · Generalized method of moments · Monetary economics · Operating leverage · Panel data · Statistics · Corporate Finance and Governance · Financial Reporting and Valuation Research · Mathematics · Working Capital and Financial Performance · Finance

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