By studying cash flows from operating, investing, and financing activities, we explore the effect of these various cash flows on firm value by employing censored panel data models due to concerning panel data employed and characteristics of dependent variables. Results imply that firms raising funds for capital budgeting projects can enhance their firm value, resulting in cash inflows from financing activities and cash outflows to investing activities consistent with our cognitions. However, results reveal that cash inflows from operating activities may not be regarded as a positive signal different from the relevant studies. We infer that the market is increasingly competitive for Taiwanese enterprises due to more and more competitors from South Korea and China; in addition, we argue that firm value might not be enhanced if cash inflows from operating resulting from sales increased due to lower profit margin or purchases shrunk owing to market share declined.
The Quarterly Review of Economics and Finance 71, p.280-290