Investment Cash Flow Sensitivity and Tobin’s Q: The Case of Advanced Emerging Markets in Latin America

  •  Bruno Figlioli    
  •  Fabiano Guasti Lima    


This paper examines whether the capital market and the internal generation of cash flows bring relevant information to decisions on corporate investments. For this investigation, we used data from 255 companies located in four Latin American (LA) countries: Brazil, Chile, Mexico and Peru (BCMP countries). The analysis period is from 2000 to 2017. The results indicate that cash flow represents one of the main drivers of corporate investments. In contrast, there were no indications that the capital market translates into a mechanism for transmitting useful information to firm managers about investments. Other drivers of value identified are associated with sales, cash and cash equivalents, and asset tangibility.

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