Sensitivity to Changes in Cash Flows and Firm Value and Changes of Investments

The change in operating cash flow as a source of the companies’ cash flow has a significant impact on asset structure and capital, including held cash, capital investment and external financing, so that the increase in cash of the companies, in the short term, increases savings and reduces the external financing and in long-term increases capital investment and external financing. Positive operating cash flow does not guarantee the good performance of the company. If operating cash flow is not sufficient for financial needs and investment, the company will be faced with financial problems. This study examined the relationship between sensitivity to changes in cash flows and firm value and changes of investments in companies. For this purpose, a sample of 100 companies listed in Tehran Stock Exchange is studied for the 5-year period of 2008 to 2012. To verify the hypotheses, a multivariate regression model is used. Hypotheses test results show that there is a significant relationship between sensitivity to changes in cash flows and changes of investments. Also, there is a significant relationship between firm value and investment changes.