School of Business and Management

Research Seminar Series: Why Did the Investment-Cash Flow Sensitivity Decline over Time?

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28 March 2018

Time: 1:00 - 2:00pm
Venue: FB 4.04/4.08 Bancroft

Professor Chu Zhang from Hong Kong University of Science and Technology will discuss: Why Did the Investment-Cash Flow Sensitivity Decline over Time? (abstract below).


This lecture is hosted by Dr Ni Peng Lecturer in Finance, School of Business and Management, Queen Mary University of London



 In this paper we reinvestigate the issue regarding the investment-cash flow sensitivity (Fazzari, Hubbard and Petersen 1988 and Kaplan and Zingales 1997). We propose an explanation for why corporate investment used to be sensitive to cash flow and why the sensitivity declined over time. The sensitivity results from the importance of tangible capital and its productivity in the old economy. New-economy firms tend to operate with a higher level of intangible capital, face more intensive competition, and have cash flows which have less predictive power for their future values. As the number of new-economy firms grew and old-economy firms adapted to the new-economy environment, the average investment-cash flow sensitivity declined. The empirical results support our explanation of the sensitivity.


About Professor Chu Zhang:

 Professor Chu Zhang is the Acting Head and Professor in Finance of Department of Finance, Hong Kong University of Science and Technology (HKUST) Business School. He is the leading researcher in Asset pricing theories and empirical studies and financial markets and institutions in China and Japan, and has published on top finance and management journals, e.g. Journal of Finance, Journal of Financial Economics, Review of Accounting Studies, Journal of Financial and Quantitative Analysis, Management Science. He obtained his MBA and PhD in Finance at University of Chicago.

Further information can be found here: