Asymmetric Effects of the Financial Crisis: Collateral-Based Investment-Cash Flow Sensitivity Analysis
IMF Working Papers, April 1, 2012
Source details
- Canonical URL
- Asymmetric Effects of the Financial Crisis: Collateral-Based Investment-Cash Flow Sensitivity Analysis
Other formats
Bibliographic details
- Authors: Vadim Khramov
- Published: April 1, 2012
- Series: IMF Working Papers
Overview
- Research question: Does the value of a firm's assets that can be used as collateral affect measured investment-cash flow sensitivity, using the financial crisis of 2008 as a natural experiment.
- Core proposition: The share of physical capital in assets influences investment-cash flow sensitivity; this sensitivity changed after the 2008 crisis when banks revised expectations about asset values on firms' balance sheets.
- Study period: panel data on U.S. firms from 1990 to 2011.
Data and Methodology
- Empirical approach: Uses the 2008 financial crisis as a natural experiment to assess changes in investment-cash flow sensitivity conditional on collateral value.
- Sample: U.S. firms, panel data covering 1990 to 2011.
- Key variable emphasized: share of physical capital in assets as a proxy for collateralizable value.
Main Findings
- The share of physical capital in assets has a strong influence on investment-cash flow sensitivity.
- Investment-cash flow sensitivity decreased substantially after the 2008 crisis when banks changed expectations about the value of assets on firms' balance sheets.
- The analysis deepens understanding of firms' investment behavior by highlighting asymmetry arising from collateral valuation changes during a financial crisis.
Interpretation and Policy Implications
- Measurement implication: When estimating investment-cash flow sensitivity, analysts should take into account the value of assets that can serve as collateral, not only cash-flow measures.
- Crisis dynamics: Changes in banks' expectations about collateral values can materially alter firms' investment responses to internal cash flows, implying that financial frictions are state-dependent and asymmetric around crises.
- Broader relevance: Findings inform models of firm investment behavior under financial constraints and have implications for how shocks to asset valuations propagate through firm-level investment.
Key Descriptors and Topics
- Subject keywords included in the source: Collateral, Currencies, Financial crises, Financial institutions, Financial statements, Global financial crisis of 2008-2009, Money, Public financial management (PFM).
- Additional keywords listed in the source: Asia and Pacific, Asymmetric Effects, Collateral, Currencies, Europe, Financial Crisis, Financial statements, firms balance sheets, firms draw, Global, Global financial crisis of 2008-2009, investment-cash flow sensitivity, representative firm, right, sensitivity coefficient, sensitivity model, WP.
Vadim Khramov. "Asymmetric Effects of the Financial Crisis: Collateral-Based Investment-Cash Flow Sensitivity Analysis", IMF Working Papers 2012, 097 (2012), accessed 9/17/2026