Financing Restrictions and Cash Policy Management at Sao Paulo Stock Exchange Companies [Restricoes De Financiamento E Politica De Gestao De Caixa Nas Empresas Da Bovespa]

Abstract

The financial restrictions affect the business conduct, especially in the cash flow financial management to undertake good investment projects. The aim of this study was to identify what the proportion and characteristics of companies that have an active cash management policy. For both, we used to the panel data regression techniques with financial information related to cash flow of 158 companies listed at the Sao Paulo Stock Exchange in the period 1996 to 2005. Only 27 (17.1%) of companies in the sample study had a cash policy consistent with the model of financial constraint and active management of cash flow. These companies have a positive and statistically significant coefficient of cash flow sensitivity of cash. These companies with financial constraint on average generate a less cash flow as a percentage of assets, undertake fewer investments, have worse liquidity and debt indicators and are smaller in size.

Keywords: Financial policy, Financial constrains, Cash management, Cash flow, Open companies, Brazil

JEL Classification: G31, G32, M2