Credit Expansion, Free Cash Flow and Enterprise Investment: An Empirical Study Based on Listed Companies in China

Nan ZHOU; Wai Yan SHUM; Sze Nam CHAN; Fujun LAI

doi:10.5539/ijef.v9n9p70

Credit Expansion, Free Cash Flow and Enterprise Investment: An Empirical Study Based on Listed Companies in China

Nan ZHOU, Wai Yan SHUM, Sze Nam CHAN, Fujun LAI^*

^*Corresponding author for this work

Department of Economics

Research output: Journal Publications › Journal Article (refereed) › peer-review

Abstract

By using the data of 936 listed companies from 2009 to 2014 in China, we use GMM method to empirically investigate whether credit expansion and free cash flow connect with the investment in enterprises. We decompose the ineffective investment into over-investment and insufficient-investment by drawing up Richardson’s over-investment measurement method. The empirical results find that credit expansion and free cash flow promote corporate new investment and over-investment, which is also confirmed by the robustness test.

Original language	English
Pages (from-to)	70-82
Number of pages	13
Journal	International Journal of Economics and Finance
Volume	9
Issue number	9
Early online date	10 Aug 2017
DOIs	https://doi.org/10.5539/ijef.v9n9p70
Publication status	Published - 2017

Keywords

credit expansion
free cash flow
investment behavior
over investment
over capacity

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10.5539/ijef.v9n9p70Licence: CC BY

http://ccsenet.org/journal/index.php/ijef/article/view/69330

Cite this

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title = "Credit Expansion, Free Cash Flow and Enterprise Investment: An Empirical Study Based on Listed Companies in China",

abstract = "By using the data of 936 listed companies from 2009 to 2014 in China, we use GMM method to empirically investigate whether credit expansion and free cash flow connect with the investment in enterprises. We decompose the ineffective investment into over-investment and insufficient-investment by drawing up Richardson{\textquoteright}s over-investment measurement method. The empirical results find that credit expansion and free cash flow promote corporate new investment and over-investment, which is also confirmed by the robustness test.",

keywords = "credit expansion, free cash flow, investment behavior, over investment, over capacity",

author = "Nan ZHOU and SHUM, {Wai Yan} and CHAN, {Sze Nam} and Fujun LAI",

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language = "English",

volume = "9",

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journal = "International Journal of Economics and Finance",

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T1 - Credit Expansion, Free Cash Flow and Enterprise Investment: An Empirical Study Based on Listed Companies in China

AU - ZHOU, Nan

AU - SHUM, Wai Yan

AU - CHAN, Sze Nam

AU - LAI, Fujun

PY - 2017

Y1 - 2017

N2 - By using the data of 936 listed companies from 2009 to 2014 in China, we use GMM method to empirically investigate whether credit expansion and free cash flow connect with the investment in enterprises. We decompose the ineffective investment into over-investment and insufficient-investment by drawing up Richardson’s over-investment measurement method. The empirical results find that credit expansion and free cash flow promote corporate new investment and over-investment, which is also confirmed by the robustness test.

AB - By using the data of 936 listed companies from 2009 to 2014 in China, we use GMM method to empirically investigate whether credit expansion and free cash flow connect with the investment in enterprises. We decompose the ineffective investment into over-investment and insufficient-investment by drawing up Richardson’s over-investment measurement method. The empirical results find that credit expansion and free cash flow promote corporate new investment and over-investment, which is also confirmed by the robustness test.

KW - credit expansion

KW - free cash flow

KW - investment behavior

KW - over investment

KW - over capacity

U2 - 10.5539/ijef.v9n9p70

DO - 10.5539/ijef.v9n9p70

M3 - Journal Article (refereed)

SN - 1916-971X

VL - 9

SP - 70

EP - 82

JO - International Journal of Economics and Finance

JF - International Journal of Economics and Finance

IS - 9

ER -

Credit Expansion, Free Cash Flow and Enterprise Investment: An Empirical Study Based on Listed Companies in China

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Keywords

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