TY  - JOUR
AU  - Lamont,Owen
TI  - Cash Flow and Investment: Evidence from Internal Capital Markets
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 5499
PY  - 1996
Y2  - March 1996
UR  - http://www.nber.org/papers/w5499
L1  - http://www.nber.org/papers/w5499.pdf
N1  - Author contact info:
Owen Lamont
Department of Economics
Harvard University
Cambridge MA 02138
E-Mail: owen.lamont@yale.edu
AB  - 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.
ER  -