What drives investment–cash flow sensitivity around the World? An asset tangibility Perspective

Fariborz Moshirian, Vikram Nanda, Alexander Vadilyev, Bohui Zhang

Research output: Contribution to journalArticlepeer-review

36 Citations (Scopus)


Motivated by ongoing debates on investment–cash flow sensitivity (ICFS) and its documented decline and disappearance in the U.S., we investigate the determinants of ICFS. Using firm-level data across 41 countries for the 1993–2013 period, we document an important role of asset tangibility in explaining the patterns in ICFS. Asset tangibility affects ICFS through two channels: investment intensity and cash flow persistence. As the share of tangible capital, investment and cash flow persistence has fallen in developed economies, ICFS has declined. In contrast, as developing economies operate with more tangible capital, have higher investment rates and more persistent cash flows, their ICFS is more stable. The results support our explanation of ICFS as a reflection of capital (investment) intensity and income predictability, rather than a measure of financial constraints.
Original languageEnglish
Pages (from-to)1-17
Number of pages17
JournalJournal of Banking and Finance
Publication statusPublished - Apr 2017
Externally publishedYes


  • Investment–cash flow sensitivity
  • Investment–cash flow–tangible capital
  • sensitivity
  • Asset tangibility
  • Investment intensity
  • Cash flow persistence
  • Investment–cash flow–tangible capital sensitivity


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