Keywords: Cash flow, investment, liquidity constraint
Abstract: Lamont (1997) claims to find evidence of credit market imperfections
that distort financing and investment decisions of a sample of
oil-dependent firms, as investment by non-oil units fell when oil cash
flow dropped. However, a simple test reveals that few of these firms
behaved in a fashion consistent with binding cash flow constraints.
In addition, most were cash rich. The data provide strong evidence
against the hypothesis that investment decisions by non-oil units were
significantly affected by oil cash flow, or that credit market
imperfections are an important factor for this set of firms.
Full paper (848 KB PDF)
Home | Economic research and data | FR working papers | FEDS | 1997 FEDS papers
To comment on this site, please fill out our feedback form.
Last update: September 17, 1997