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http://dx.doi.org/10.5762/KAIS.2013.14.2.674

The impact of liquidity constraints on investment expenditures: Evidences from family and non-family firms  

Kim, Choong-Hwan (College of Industrial Science, Kongju National University)
Publication Information
Journal of the Korea Academia-Industrial cooperation Society / v.14, no.2, 2013 , pp. 674-680 More about this Journal
Abstract
This paper investigates the impact of liquidity constraints on investment expenditures of family and non-family firms. We analyze the ownership structure of family firms to determine whether family control alleviates or exacerbates investment-cash flow sensitivity in domestic firms. To examine the impact of liquidity constraints on investment expenditures of family and non-family firms, we used a financial data of 644 Korea Exchange traded companies over the 2000 - 2010 period. We estimated a time-series and cross-sectional regression model, using samples of family firms and non-family firms. The results show that cash flow is not associated with investment expenditure in family firms, whereas cash flow has a positive impact on investment in non-family firms. Our results show that lower or no investment-cash flow sensitivities in family-controlled firms are mainly attributable to lower agency costs through strong monitoring activities of family members. Higher investment-cash flow sensitivities are observed in non-family firms with more agency problems. This suggests that investment-cash flow sensitivities would be useful measures of liquidity constraints.
Keywords
Cash flow sensitivity; Liquidity constraints; Investment policy; Family firms; Agency costs;
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Times Cited By KSCI : 1  (Citation Analysis)
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