Mickey Mouse and the Idiot Principle for Assessing Research Contribution: Discussion of ‘Is the Relationship between Investment and Conditional Cash Flow Volatility Ambiguous, Asymmetric or Both?’

Keefe and Tate (2013) provide both interesting and worthwhile insights into whether, under what circumstances and to what extent cash flow volatility impacts corporate investment. In the current paper, I have two related goals. First, more narrowly, I provide a constructively critical commentary on salient aspects of their empirical strategy, giving particular emphasis to the key drivers of Keefe and Tate's contribution to the literature. Second, illustrated in the context of Keefe and Tate, my broader goal is to give general advice especially aimed at novice researchers on how to make any empirical study more appealing to a critical reader.

[1]  Edward E. Leamer,et al.  Specification Searches: Ad Hoc Inference with Nonexperimental Data , 1980 .

[2]  Is the Relationship between Investment and Conditional Cash Flow Volatility Ambiguous, Asymmetric or Both? , 2013 .

[3]  Robert A. Connolly.  An Examination of the Robustness of the Weekend Effect , 1989, Journal of Financial and Quantitative Analysis.

[4]  D. Lindley.  A STATISTICAL PARADOX , 1957 .

[5]  Stefan Hirth,et al.  Financing constraints, cash-flow risk, and corporate investment , 2011 .

[6]  M. Weisbach,et al.  The Cash Flow Sensitivity of Cash , 2003 .

[7]  Michael E. Bradbury.  Why You Don’t Get Published: An Editor’s View , 2012 .

[8]  Peter Clarkson.  Publishing: Art or Science? Reflections from an Editorial Perspective , 2012 .

[9]  Bernadette A. Minton,et al.  The Impact of Cash Flow Volatility on Discretionary Investment and the Costs of Debt and Equity Financing , 1999 .

[10]  Merton H. Miller.  The Cost of Capital, Corporation Finance and the Theory of Investment , 1958 .

[11]  J. Richard,et al.  Specification Searches: Ad Hoc Inference with Nonexperimental Data , 1980 .

[12]  N. Moyen.  Investment-Cash Flow Sensitivities: Constrained Versus Unconstrained Firms , 2002 .

[13]  David J. Denis,et al.  Financial Constraints, Investment, and the Value of Cash Holdings , 2007 .

[14]  Andrew T. Levin,et al.  When Did Firms Become More Different? Time-Varying Firm-Specific Volatility in Japan , 2012 .

[15]  E. C. Chang,et al.  International Evidence on the Robustness of the Day-of-the-Week Effect , 1993, Journal of Financial and Quantitative Analysis.

[16]  Andrew T. Levin,et al.  Cyclical Changes in Firm Volatility∗ , 2010 .