| The paper, which is the reference on the previous studies, chooses Chinese listed companies as research samples, examining the relationship between corporate investment and cash flow by linear regression and factors reduce method. The research verifies the sensitive relation between investment and cash flow. It also found that free cash flow agency cost theory accounts for firms with bad prospects but sufficient cash flow while cash flow agency cost theory and information asymmetric theory may account for firms with good prospects but insufficient cash flow together.The paper further discusses investment-cash flow sensitivity according to three aspects: corporate size, financing constraints degree and industry. It proves that investment-cash flow sensitivity may be affected by both information asymmetric theory and cash flow agency cost theory even by examining the same factor. Compared with asymmetric theory, cash flow agency cost theory plays a more important role. Finally, the paper suggests some recommendations as references to the situation of Chinese market. |
