Cash Flow-Investment Relationship in Malaysia: A Panel Threshold Regression Analysis

Mohd Adib Ismail, Mawar Murni Yunus



The objective of this article is to analyse the relationship pattern of cash flow-investment among low and high debt firms. To investigate the issue, we employed Hansen’s (1999) threshold method of non-dynamic panel data. In this article, the firm debt ratio was used as threshold variable. A balanced panel data of companies listed on Bursa Malaysia, comprising of 234 companies for a period from 2004 to 2010, was utilized in this study. The results showed that debt ratio has a significant role at explaining the cash flow-investment relationship among firms. In particular, the results showed that low debt firms exhibit significant support to the financial constraints hypothesis, while high debt firms demonstrate support to the free-cash flow hypothesis. This finding explains why the cash flow-investment relationship of certain firms is negative, while other firms are positive. It also signifies the inability of constrained firms to access to external financing; thus, leading the firms to significantly rely on their internal financings.

Keywords: Investment; cash flow; non-dynamic panel; threshold regression


Artikel ini bertujuan untuk menganalisis sama ada hubungan aliran tunai-pelaburan mempunyai bentuk yang sama bagi firma yang keberhutangan tinggi dan yang keberhutangan rendah. Untuk mengkaji isu ini, kami menggunakan kaedah nilai ufuk Hansen (1999) bagi data panel tidak dinamik. Dalam artikel ini, nisbah hutang firma digunakan sebagai pembolehubah nilai ufuk. Dengan menggunakan sampel data panel berimbang yang terdiri daripada 234 syarikat tersenarai di Bursa Malaysia bagi tahun 2004 hingga 2010, keputusan kajian menunjukkan bahawa nisbah hutang memain peranan penting dalam menerangkan hubungan aliran tunai-pelaburan dalam firma. Keputusan menunjukkan bahawa firma keberhutangan rendah menetapi hipotesis kekangan kewangan, manakala firma keberhutangan tinggi menetapi hipotesis aliran tunai bebas. Dapatan ini menjelaskan mengapa ada syarikat mempunyai hubungan aliran tunai-pelaburan yang negatif, sedangkan yang lainnya mempunyai hubungan positif. Ini menunjukkan bahawa kesukaran firma untuk memperoleh akses kepada sumber pembiayaan luar akan menyebabkan firma terpaksa bergantung kepada sumber pembiayaan dalaman mereka.

Kata kunci: Pelaburan; aliran tunai; panel tidak dinamik; penganggaran nilai ufuk

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