Investigating the relationship between firm investment sensitivity and financing constraints with a distinctive Chinese firm data set

This paper demonstrates the non-monotonic relationship between firm investment-cash flow sensitivity and financial constraint by investigating a moderating variable to this relationship. Through a distinctive Chinese firm dataset, this paper suggests the investment in Chinese real estate as an example that moderates the relationship between investment-cash flow sensitivity and financial constraint. The result confirms a non-monotonic relationship between investment-cash flow sensitivity and financial constraint and encourages further investigation into the presence and the endogeneity of moderating variables between the aforementioned relationships.

Data and R codes available upon request

Global Commerce Scholar