Is the cash flow sensitivity of cash asymmetric? African evidence

Abstract

We examine whether the cash flow sensitivity of cash is asymmetric using a sample of 745 firms from understudied African countries over the period from 2000–2015. We hypothesise and find significant asymmetry in the cash flow sensitivity of cash conditional on cash flow and financial constraints. Firms with positive cash flow save while those with negative cash flow dissave. These differences are more apparent in the presence of financial constraints. Our results affirm the asymmetry in the cash flow sensitivity of cash and highlight the severity of the impact of financial constraints on corporate decisions in emerging markets.