Abstract

Corporate investment has been responsive to sales among US manufacturing firms for a long time. Unlike the investment-cash flow sensitivity which declined to near zero in recent years, the investment-sales sensitivity has remained economically and statistically high. The finding of the investment-sales sensitivity lends support to the Q-theory explanation over the financial-constraint explanation of the investment-cash flow sensitivity. The contrast between the two sensitivities in more recent years reveals the difference in the informational role for the investment of tangible assets between sales and cash flow. The difference is mainly driven by the capricious need of accumulating intangible capital by new-economy firms.

About the Speaker

Professor Chu Zhangis a chair professor in the Department of Finance and the director of Centerfor Investing at the Hong Kong University of Science and Technology(HKUST).  Professor Zhang obtained hisMBA and PhD degrees in finance from the University of Chicago.  He has published in various top-tier financejournals such as the Journal of Finance, the Journal of Financial Economics,Journal of Financial and Quantitative Analysis, Management Science, Journal ofMonetary Economics and Journal of Business. His research interests range fromempirical methodology of asset pricing models, financial market volatility, tocredit risk in the Japanese market, fixed-income and repo markets in China, andthe warrants and options markets in Hong Kong.  His more recent work involves the characteristics based factor modelsand the role of information risk in asset pricing.   Professor Zhang referees for many financejournals and takes part in various professional activities outside HKUST.  From 1997 to 2022, Professor Zhang obtainedmore than 10 research grants from the Research Grants Council (RGC) of HongKong.  In 2021, Professor Zhang, as theproject coordinator, led a team of professors from the business school and theenvironment division at HKUST to secure a large, theme-based research grantfrom the RGC, entitled “Developing Hong Kong as a Global Green Finance Center.”