Relationship Between Investment and Cash Flow Under High and Low Investment Opportunities: Evidence from Pakistani Manufacturing Firms

  • Dr Mohammad Salih Memon
  • Imtiaz Zahid
  • Maria Shaikh
  • Aisha Bashir Shah
  • Akmal Khan
  • Dr.Faiz Muhammd Shaikh
Keywords: Cash flow; Tobin’s Q; Investment; High and Low investment opportunities.


This paper examines the relationship between cash flow and investment under high and low investment opportunities of 167 Pakistani non-financial manufacturing firms listed in the Karachi Stock Exchange during the period 2004-2013. Tobin’s Q is employed to capture the investment opportunities and sales are taken as control variable.  A panel regression model is used to investigate the relationship of cash flow, Tobin’s Q and sales on investment.  In case of high investment opportunities firms, the relationship of investment and cash flow is positive and significant while under low investment opportunities firms, this relationship is also positive but insignificant.  These results indicate that the high opportunities firms rely mostly on internally generated cash flow whereas the low investment opportunities firms prefer to distribute its earnings as dividend.


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Author Biographies

Dr Mohammad Salih Memon

Director: Industrial Liaison & Placement Bureau, Associate Professor
Business Administration (SALU) Khairpur

Imtiaz Zahid

Lecturer Govt. Postgraduate Islamia College, Faisalabad.

Maria Shaikh

Assistant Professor-IBA-University of Sindh Jamshoro

Aisha Bashir Shah

Assistant Professor-IBA-University of Sindh Jamshoro

Akmal Khan

Lecturer, University of Sargodha Lyallpur campus, Faisalabad

Dr.Faiz Muhammd Shaikh

Associate Professor-SZABAC-Dokri


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