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Table 5 Cash flow sensitivity of external financing: augmented regression model

From: Financial frictions and the cash flow – external financing sensitivity: evidence from a panel of Pakistani firms

Independent Variables

Dependent Variable: External_Financing

Cash_Flow

Growth

Size

Cash

Inven_tory

PPE

Debt/ Equity

Hansen’s J-stat (p-value)

AR(2)

Panel A: KZ Index

  Constrained firms (CF)

−0.0109***

(0.003)

− 0.0025***

(0.001)

0.0142***

(0.003)

0.0110***

(0.004)

−0.0106***

(0.002)

− 0.0069***

(0.003)

−0.0038***

(0.001)

0.106

0.102

 Unconstrained firms (UCF)

−0.0120***

(0.004)

0.0147***

(0.003)

0.0234***

(0.006)

−0.1514***

(0.021)

−0.0236***

(0.001)

− 0.0057***

(0.001)

−0.0006***

(0.000)

0.288

0.182

Panel B:Debt to Asset Ratio

 Constrained firms (CF)

−0.0023***

(0.0002)

0.0014**

(0.0001)

−0.0349***

(0.003)

0.0144***

(0.007)

0.0867***

(0.024)

−0.0606**

(0.001)

−0.0028***

(0.00001)

0.242

0.526

 Unconstrained firms (UCF)

−0.0227***

(0.003)

0.0166***

(0.001)

0.0497***

(0.019)

−0.0163***

(0.001)

−0.0375***

(0.001)

− 0.0302***

(0.002)

−0.0012***

(0.00001)

0.893

0.106

Panel C: Interest Coverage Ratio

 Constrained firms (CF)

−0.0165***

(0.001)

0.0020

(0.143)

0.0831***

(0.004)

0.0114***

(0.001)

−0.0297***

(0.008)

−0.0384***

(0.002)

− 0.0063***

(0.001)

0.120

0.842

 Unconstrained firms (UCF)

−0.2505***

(0.024)

0.0031

(0.123)

0.0423***

(0.005)

0.0543***

(0.013)

−0.0207***

(0.003)

−0.0524***

(0.007)

0.0018***

(0.0005)

0.183

0.524

  1. Note: Table 5 displays the results of two-step system-GMM estimations for the extended regression model (Eq. (2)). The dependent variable is External_Financing, while the independent variables are Cash_Flows, Growth, Size, Cash, Inventory, PPE, (Plant, Property and Equipment) and Debt/Equity. The above table reports three constrained criteria to divide the firms into constrained and unconstrained categories (KZ Index, debt to asset ratio, and the interest coverage ratio). The estimated robust standard errors are reported in parentheses. Last two columns show Arellano-Bond AR (2) test and Hansen J test. We do not report constant term and the coefficient of the lagged dependent variable to economize on space. *** and ** denote significant at the 1% and 5% level of significant, respectively