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National Research University Higher School of EconomicsStudent ThesesCompanies’ Investment Policy During the Economic Crises

Student
Title
Supervisor
Faculty
Educational Programme
Final Grade
Year of Graduation
Anna Maslennikova
Companies’ Investment Policy During the Economic Crises
Faculty of Economics
Master’s programme
8
2014
This paper analysis the impact of financial constraints on companies’ capital expenditures during the 2008-2009 financial crisis. We test two hypotheses. H1: During the financial crisis the investments are more sensitive to cash flow. H2: During the financial crisis the investments are more sensitive to cash flow for the firms which are more financially constrained. We use financial data on British nonfinancial companies during the 2004-2010 time period. We test our hypotheses using ANOVA F-Statistics and Generalized least square model (GLS) with Cross-section heteroskedasticity specification. The results prove both hypotheses. We also found that the companies need to manage the financial leverage ratio more precise still it has the most significant impact on the investment sensitivity to cash flow during crisis and non-crisis periods.

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