The Relationship between Cash Flows and Investment according to Economic Status

We investigate the relationship between cash flows and investment according to the economic status and industry characteristics. Unlike the well-known knowledge of investment strategy for an individual firm, our research utilizes the periods for which different economic status are reflected in the analysis. We estimate the relationship between the cash flows and investment from our model with different economic status, such as normal, pre-crisis, crisis, and post-crisis periods. In our empirical analysis, we show that the investment is negatively sensitive to cash flows, but positively sensitive to Tobin’s q during the post-crisis period (2010–2015). Furthermore, the relationship measured by industry suggests that construction and manufacturing could contribute to the negative relationship between investment and cash flows in the post-crisis period.