Financial Constraints and Cash Flow Sensitivity to Investment in Indian Listed Manufacturing Firms

  • Sanjeev Kumar
  • K. S. Ranjani
Conference paper
Part of the Springer Proceedings in Business and Economics book series (SPBE)


The present study is an effort to test the validity of cash flow sensitivity to investment as a measure of financial constraints in Indian manufacturing firms using panel data for 768 listed firms over a period of six years (2010–2016). It also analyses effects of tangibility of assets in alleviating financial constraints. Findings suggest that stand-alone, small and lower debt capacity firms are more cash flow sensitive to investment in comparison to the business group affiliated, large and higher debt capacity firms. Investment for large firms is strongly influenced by capital structure whereas medium-size firms have a mixed effect of financial factors on investment decisions. Further, results for effects of tangibility of assets on easing financial constraint are found significant only in low market capitalization firms.


Financial constraints Investment determinants Market capitalization Tangible net worth Ownership classification Panel data India 


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© Springer International Publishing AG, part of Springer Nature 2018

Authors and Affiliations

  1. 1.National Institute of Industrial EngineeringMumbaiIndia

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