Investment-cash Flow Sensitivity of Russian Companies under Financial Constraints

This paper examines investment-cash flow sensitivity under financial constraints. The novelty of the research can be seen in universal measure, which is used as a proxy variable for financial constraints and which is calculated using principal component analysis based on three variables: dividend payout ratio, financial leverage, company size. The study uses panel data of financial accountability of Russian companies for 2014-2018. The model with fixed effects, which also included factors of investment activity, was used in the paper to verify hypothesis. As a result, a significant and positive dependence of the investment-cash flow sensitivity on the level of financial constraints was revealed, and the accuracy of measuring the financial constraints of companies was confirmed. An additional result was the reveal of the negative impact of the size and age of the company and the positive impact of ROI on the company's investment activity.