Arab Journal of Administration المجلة العربية للإدارة


This research aims to study the role of cash flows in influencing the costof borrowing in the Egyptian business environment, for the purpose of identifying whether the lenders take into account the efficiency of the cash flows of the borrowing companies as an indicator of their ability to pay when determining the lending rate. To achieve this goal, an Empirical study is conducted including a cross sectional analysis of a sample of three Shareholding companies which are listed in the Egyptian Stock Exchange, representing 11 sectors of the various activities during the period from 2004 to 2009. The independent variables of the study are confined to the three key elements of the cash flows; which are operating, investing and financing cash flows, in addition to the two control variables, namely; the size of the company and Leverage.While the cost of borrowing represents the dependent variable, the four key variables of the study were measured through four ratios, which proposed to assess the efficiency of these variables. The multiple regression model has been used to test three hypotheses that were formulated for the relationship between the cash flows and the cost of borrowing. The study found several significant results: the existence of a strong inverse relationship between the operating cash flows and the cost of borrowing, and a medium inverse relationship between the financing cash flows and the cost of borrowing, while the results did not prove any relationship between the investing cash flows and the cost of borrowing.