Abstract
Using data from the 1986 oil price decrease, I examine the capital expenditures of non-oil subsidiaries of oil companies. I test the joint hypothesis that 1) a decrease in cash/collateral decreases investment, holding fixed the profitability of investment, and 2) the finance costs of different parts of the same corporation are interdependent. The results support this joint hypothesis: oil companies significantly reduced their non-oil investment compared to the median industry investment. The 1986 decline in investment was concentrated in non-oil units that were subsidized by the rest of the company in 1985.
Keywords
Cash flowInvestment (military)Monetary economicsCapital flowsBusinessEconomicsCapital (architecture)Financial systemFinanceMicroeconomicsGeography
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Publication Info
- Year
- 1996
- Type
- preprint
- Citations
- 50
- Access
- Closed
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Cite This
Owen Lamont
(1996).
Cash Flow and Investment: Evidence from Internal Capital Markets.
.
https://doi.org/10.3386/w5499
Identifiers
- DOI
- 10.3386/w5499