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The credit multiplier mechanism implies that financially constrained firms face more complementarity between cash flow and external funds As we said above, there is very limited empirical evidence on the role of credit multiplier on the relationship between external financing and cash flow for financially constrained and unconstrained firms. According to Almeida & Campello (2007), financially constrained firms should show more complementarity between the external financing – cash flow relationship because of higher tangible assets. Campello & Hackbarth (2012) used data covering the period 1971–2005 and study the impact of asset tangibility on firms’ investment and financing decisions. They found that compared to financially unconstrained firms, financially constrained firms...