The relationship between cash flow volatility and investment across non-financial sector of Pakistan

Abstract

This study has been conducted to examine about the variation shown by investment because of cash flow volatility. In this study all the non-financial firms listed in Pakistan stock exchange have been brought under consideration for examination and on the basis of convenient sampling technique 140 non-financial firms have been examined as a sample.Maximum tenure or period was availed from 2014-2019 for data collection which have been obtained from official financial statements. This study used panel data model for the data analysis. In this study both the fixed effect model and random effect model have brought under-utilization, but by running the hausmen test, fixed effect model was recommended for the study. The result of fixed effect model showed that dividend payout ratio , market to book ratio and cash flow volatility have significant effects on investment . On the other hand cash holding, size and leverage have insignificant effects on investment of the firm. The breush pagan test recommends us that random effect model is suitable enough while the chow test allow us that fixed effect model is best.