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1
Sitthipongpanich, Thitima. "Family ownership and free cash flow." International Journal of Managerial Finance 13, no. 2 (April 3, 2017): 133–48. http://dx.doi.org/10.1108/ijmf-06-2014-0088.
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Purpose The purpose of this paper is to investigate the effect of family ownership on investment-cash flow sensitivity and on firm performance. Design/methodology/approach The author uses panel data to examine the relationship between investment and cash flow and between family ownership and the firm performance of Thai listed firms from 2001 to 2008. To account for the endogeneity of the lagged dependent variable, the investment equation is estimated by the generalized method of moments, following Arellano and Bond (1991). Findings The presence of family owners reduces the sensitivity of investment and cash flow. At low and high levels of family ownership, an increase in family shareholding leads to lower investment-cash flow sensitivity. In contrast, firms with medium family ownership levels have higher investment-cash flow sensitivity. Only at high levels of family ownership is firm performance positively related to family shareholding. Originality/value The ownership levels of family shareholders affect the investment-cash flow sensitivity in an S-shaped relation, supporting the interest alignment and entrenchment effects. When family shareholders have high ownership incentives, their interest alignment reduces the agency costs of free cash flow problems and leads to higher firm performance.
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Lin, Dan, and Lu Lin. "Corporate Governance and Firm Performance: A Study of High Agency Costs of Free Cash Flow Firms." JOURNAL OF SOCIAL SCIENCE RESEARCH 12, no. 2 (July 31, 2018): 2724–31. http://dx.doi.org/10.24297/jssr.v12i2.7533.
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Excessive free cash flows can lead to high agency problems as retaining free cash flow reduces the ability of capital market to monitor managers. Managers are also likely to waste the free cash flow on value-decreasing investments. Based on the free cash flow hypothesis, this study examines the relationship between corporate governance and firm performance of a sample of high agency costs of free cash flow firms, which is defined as firms that have high free cash flow and low investment opportunities. The sample firms are extracted from firms listed on the S&P/TSX composite index between 2009 and 2012. Using corporate governance scores provided by The Globe and Mail, this study finds that better corporate governance is associated with better firm performance, measured by return on equity. The results highlight the importance of corporate governance in protecting shareholders’ interests.
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Dewi, Ida Ayu Made Chandra, Maria Mediatrix Ratna Sari, I. G. A. N. Budiasih, and Herkulanus Bambang Suprasto. "Free cash flow effect towards firm value." International research journal of management, IT and social sciences 6, no. 3 (May 31, 2019): 108–16. http://dx.doi.org/10.21744/irjmis.v6n3.643.
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A company is established to raise the value of the firm by maximizing profit and shareholder’s wealth. In the capital market, firm value is reflected in the stock price. To raise a firm value, needed to investigate the determinant of firm value. So, this research is aimed to determine the effect of free cash flow on firm value with dividend payout and investment opportunity set as mediator. Population in this research was companies listed on the Main Board Stock Index in Indonesian Stock Exchange for 2013-2017. The sample is 189 observation and it was taken by using purposive sampling technique. Data analysis technique used in this research is path analysis and Sobel test. This research founded that free cash flow has a positive significant effect on firm value and dividend payout, free cash flow has a negative effect on investment opportunity set, dividend payout has a positive significant effect on firm value, and investment opportunity set has a positive significant effect on firm value. Furthermore, dividend payout act as a mediator on the effect of free cash flow on firm value, but investment opportunity unable to mediate the effect of free cash flow on firm value.
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Kaviani, Meysam. "Study of Information content Economic Value Added in Explain new models based on Free Cash Flow (CVFCFF and CVFCFE)." International Journal of Accounting and Financial Reporting 3, no. 1 (July 10, 2013): 277. http://dx.doi.org/10.5296/ijafr.v3i1.3767.
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Free Cash Flow (FCF) is one of the measures based on cash flow for measuring performance of firms, among various evaluation measure of performance; that indicates the cash of firm after doing necessary expenditures for keeping and developing properties. Due to that, various models based on FCF have been explained for evaluation of firms in which free cash flow to firm (FCFF) and Free Cash Flow to Equity (FCFE) can be considered as the important ones.This paper aims to give new models of Free Cash Flow. These models are called Created Value from Free Cash Flow to Firm (CVFCFF) and Created Value from Free Cash Flow to Equity (CVFCFE) that purpose of examined the content of information Economic value Added (EVA) of Iran Companies in explain of CVFCFF and CVFCFE. For this purpose a sample of 10 companies representing in the automotive of industry for a period of five years from 2005-2009 have been analyzed.The Research results indicate that there is significant relationship and positive between CVFCFF and CVFCFE with Economic value Added.
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Oktaryani, G. A. Sri, and Siti Sofiyah Abdul Mannan. "The Moderating Effect of Dividend Policy on Free Cash Flow and Profitability Towards Firm Value." JMM UNRAM - MASTER OF MANAGEMENT JOURNAL 7, no. 3 (September 15, 2018): 1. http://dx.doi.org/10.29303/jmm.v7i3.311.
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This study is aimed to determine the moderating effect of Dividend Policy on Free Cash Flow and Profitability towards Firm Value. This study use Moderate Regression Analysis (MRA) as tool to analyze the moderating effect of Dividend Policy on the sample tested. Sample are chosen by using purposive sampling method from all manufacture firms that listed on Indonesian Stock Exchange throughout 2010-2015 which offered cash dividend to their shareholders. By using panel data, the findings show that Free Cash Flow and Profitability themselves have significant effect on Firm Value. But conversely, each Free Cash Flow and Profitability does not have significant effect on Firm Value after being moderated by Dividend Policy. It is because the direct effect of Free Cash Flow and Profitability toward Firm value is bigger than the indirect effect. The results indicate that Dividend Policy is just predictor moderation in this case.Dividend Policy, Free Cash Flow, Profitability, Firm Value, Manufacture, MRA
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Jiang, Haiyan, and Ahsan Habib. "Ownership concentration, free cash flow agency problem and future firm performance: New Zealand evidence." Corporate Ownership and Control 9, no. 3 (2012): 96–110. http://dx.doi.org/10.22495/cocv9i3art8.
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This study seeks to empirically examine the effect of ownership concentration on mitigating free cash flow agency problem in New Zealand. Following Jensen’s (1986) argument that managers have incentives to misuse free cash flows, this study tests whether concentrated ownership structure helps alleviate such a problem or exacerbates it. A natural consequence of this agency problem will be overinvestment and other operational inefficiencies which are likely to have a detrimental impact on firms’ future performance. The second objective of this paper is to examine the association between FCFAP conditional on ownership concentration on future firm performance. We measure free cash flow agency problem as the product of positive free cash flows and growth opportunities proxied by Tobin’s Q and find that financial institution-controlled ownership structure in New Zealand is positively associated with free cash flow agency problem. We also document that free cash flow agency problem conditional on ownership concentration negatively affects future firm performance.
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Suwaldiman, Suwaldiman. "Pengaruh Free Cash Flow, Operating Cash Flow, dan Dividend Payout Ratio Terhadap Nilai Perusahaan." ULTIMA Accounting 10, no. 1 (December 20, 2018): 52–65. http://dx.doi.org/10.31937/akuntansi.v10i1.845.
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This research examines the impact of free cash flow, operating cash flow, and dividend payout ratio on the firm value which is represented by stock return.
This research employees a multiple linear regression analysis to test the hypothesis. Samples used in this research are 159 manufacturing companies registered in Indonesia Stock Exchange for the period of 2013, 2014, and 2015.
This research reveals that free cash flow and operating cash flow have no significant impact on the firm value. Those variables seem having no important contents in the point of view of investors. Therefore they do not response to the information. However, this research proves that dividend payout ratio have significant impact on the firm value. It can be concluded that dividend payout ratio is more important than those of free cash flow and operating cash flow. Investors will positively response to the dividend information and it will significantly increase the firm value.
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Mohan, Nancy K., M. Fall Ainina, and Daniel J. Kaufman, Jr. "Financial Characteristics Of Firms Adopting Poison Pill Plans." Journal of Applied Business Research (JABR) 4, no. 2 (October 27, 2011): 61. http://dx.doi.org/10.19030/jabr.v4i2.6434.
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This study investigates whether firms adopting poison pill plans possess financial characteristics indicative of their having free cash flow. The analysis uses six financial ratios selected to provide evidence of whether a firm has cash flows in excess of those needed to fund value-enhancing investments. A sample of 184 firms that have adopted poison pill plans were matched with firms from their industries. The results provide little evidence supporting the implications of the free cash flow theory.
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Alalawi, Ahmed, Gagan Kukreja, and Keshav Gupta. "Free Cash Flow as a Determinant of Performance and Stock Price Movement in Multinational Energy Companies." Journal of Business Management and Information Systems 3, no. 1 (June 30, 2016): 11–29. http://dx.doi.org/10.48001/jbmis.2016.0301002.
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We used the Free Cash Flow (FCF) formula to test and determine the performance of these firms, along with testing the correlation with price movement. Previous Studies showed that Free Cash flow has positive correlation with taking investment opportunities, while negative Free Cash flow represent distressed period for the firm. Questions addressed in the article is (1) whether FCF can determine the energy firm’s performance and stock price movement, (2) whether high FCF triggers investing in high return investments, and (3) whether low or negative FCF leads to financially distressed period. The results are consistent with high Free Cash flow will result in greater investment opportunity while low or negative Free Cash flow will result in distressed period for the firm. In addition, the results showed positive relation between Free Cash flow and share price movement.
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Adhikari, Ajay, and Augustine Duru. "Voluntary Disclosure of Free Cash Flow Information." Accounting Horizons 20, no. 4 (December 1, 2006): 311–32. http://dx.doi.org/10.2308/acch.2006.20.4.311.
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Modern finance texts have long advocated a focus on “free cash flow” rather than on earnings for evaluating firm performance. While U.S. GAAP does not require firms to disclose free cash flow (FCF) information, some firms voluntarily report and emphasize FCF in their financial statements. FCFs are discussed and used in some finance texts, analysts' reports, and financial press articles, yet little theoretical and conceptual guidance exists on how to compute FCF. Hence, the SEC and the FASB have expressed concern about the comparability, consistency, and transparency of these reported measures. This study provides empirical evidence on a set of firms that voluntarily disclose FCF information in their 10-K and 10-Q reports filed between 1994 and 2004. The number of firms disclosing FCF information is small but has grown in recent years. We document that FCF definitions vary widely, limiting comparability of FCF disclosures across firms. Our results also indicate that FCF firms are less profitable and more leveraged than other firms in their own industries. Moreover, FCF firms have lower credit ratings and pay out higher dividends. These results suggest that FCF firms provide FCF disclosures to augment reported income and cash flow information. As such, our results suggest that FCF firms view FCF disclosures as an important complement to their traditional reporting practices.
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Adinehzadeh, Razieh. "Corporate Governance and Firm Free Cash Flows: Evidence from Malaysia." Information Management and Business Review 5, no. 11 (November 30, 2013): 531–37. http://dx.doi.org/10.22610/imbr.v5i11.1084.
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This study provides view of free cash flow and corporate governance (CG) by addressing the relationship between audit committee characteristics with free cash flow. Specifically, this study explores whether audit committee characteristics are substitutes to control agency problem regarding to free cash flow within Malaysian firms. The data set comprise of 200 firm observations Malaysian companies for four consecutive years, which comprise of 2005 to 2008. The results show that size of audit committee, frequency of audit committee meeting, proportion of audit committee independence is positively associated with level of free cash flow (FCF). The results of study highlight the importance of corporate governance mechanism, in the form of audit committee characteristics, in the management of cash flow.
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Rambe, Bhakti Helvi. "PENGARUH PROFITABILITAS, UKURAN PERUSAHAAN, FREE CASH FLOW, SALES GROWTH, INVESTMENT OPPORTUNITY SET TERHADAP NILAI PERUSAHAAN DENGAN VARIABEL INTERVENING KEBIJAKAN HUTANG." ECOBISMA (JURNAL EKONOMI, BISNIS DAN MANAJEMEN) 1, no. 2 (July 26, 2014): 99–107. http://dx.doi.org/10.36987/ecobi.v1i2.1398.
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Profitability Analysis, Company Size, Free Cash Flow, Growth Sales, Investment Opportunity Set On Company Value With Intervening Variables Of Debt Policy This research uses causal method. The population is 143 companies, and 45 of them are used as samples, taken using purposive sampling techniques, so that there will be 179 units of observation. Data were analyzed using multiple linear regression analysis and path analysis. The results showed that, simultaneously, profitability, company size, free cash flow (FCF), sales growth, and investment opportunity set (IOS) had a significant effect on firm value. Partially, the variable Profitability and Firm Size has a positive and significant effect on firm value, Free Cash Flow (FCF), Sales Growth, and Investment Opportunities (IOS) have a positive but not significant effect on firm value. Debt to Equity Ratio (DER) has a negative influence on firm value. Simultaneously, Profitability, Firm Size, Free Cash Flow (FCF), Sales Growth, and Investment Opportunity Set (IOS) Investment Opportunity Set (IOS) Partially, the Profitability variable and Firm Size Size have a positive and significant influence on Free Cash Flow ( FCF), Sales Growth has a positive but not significant effect on Debt to Equity Ratio (DER). Meanwhile, Investment Opportunity Set (IOS) has a negative influence on Debt to Equity Ratio (DER), while Debt to Equity Ratio (DER) cannot mediate Profitability correlations, Company Size, Free Cash Flow (FCF), Sales Growth, and Sets Investment Opportunities (IOS) with Company Value.. Keywords: Profitability, Firm Size, Free Cash Flow, Sales Growth, Investment Opportunity Set, Firm Value, Debt to Equity Ratio
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Permata, Irma Sari, Nana Nawasiah, and Trisnani Indriati. "Free Cash Flow, Kinerja Internal, Dan Pengaruhnya Terhadap Nilai Perusahaan." Liquidity 7, no. 1 (July 13, 2018): 63–69. http://dx.doi.org/10.32546/lq.v7i1.174.
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The purpose of this study is to answer the phenomena that occur both theoretical phenomena and the empirical phenomenon of potential internal conflicts to the free cash flow of the company and its use for the benefit of increasing corporate value. Such internal conflicts require an appropriate settlement so as not to affect the company's failure. This study examines the role of dividend policy and ownership structure in moderating the relationship between free cash flow and firm value on manufacturing companies listed on BEI as many as 236 companies using randon sampling method. Free cash flows, profitability, firm size have a significant effect on company value while company growth has no significant effect. Dividends and majority ownership and managerial moderate free cash flow against corporate value. The results of this study are expected to generate alternative solutions to free cash flow problems and increase the value of the company.
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SUWALDIMAN, SUWALDIMAN, and JAMHARI RAMADHAN. "ASSET INSTRUMEN KEUANGAN DAN FREE CASH FLOW TERHADAP NILAI PERUSAHAAN: DIVIDEND PAYOUT RATIO SEBAGAI PEMODERASI." Jurnal Bisnis dan Akuntansi 21, no. 1 (July 15, 2019): 27–38. http://dx.doi.org/10.34208/jba.v21i1.423.
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This research examines the impact of financial instrument assets and free cash flow on the firm value. This research also tests the dividend payout ratio as the moderating variables. Data sample were taken out of the manufacturing companies listed in BEI for period of 2014 – 2016. Firm value is defined and measured as the share market price five days as the audit report released. Financial instrument assets is defined and measured by the ratio of the total financial assets to the total assets. Meanwhile free cash flow is measured by comparing the operating cash flows less by capital expenditure to the operating cash flow. Finally, dividend payout is measured by the ratio of dividend per share to the earnings per share. Regression analysis is employed to test relationship among those variables. This research reveals that the financial instrument assets have a positive and significant impact on the firm value. However, this research does not prove that the free cash flow has a positive and significant impact on the firm value. Moreover, the dividend payout ratio strengthens the impact of financial instrument assets on the firm value, but not the free cash flow. It can be concluded that market will respond positively to the information of increasing in the financial instrument assets. And the increasing in the dividend payout ratio will strengthen to the relationship. In contrast, free cash flow is not significantly responded by the market and either the dividend payout ratio.
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AL-Dhamari, Redhwan Ahmed, Ku Nor Izah Ku Ismail, and Bakr Ali Al-Gamrh. "Board diversity and corporate payout policy: Do free cash flow and ownership concentration matter?" Corporate Ownership and Control 14, no. 1 (2016): 373–83. http://dx.doi.org/10.22495/cocv14i1c2p9.
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This study investigates the effect of board diversity in terms of gender and ethnicity on dividend payout policy when a firm has free cash flow agency problem. It also tests whether the probability of diverse boards would minimize free cash flow agency problem through making large dividend payments is more pronounced in firms with high ownership concentration. We find that our results differ based on how corporate dividend policy is measured, and vary by the level of free cash flows and ownership concentration. More specifically, we find that women’s (Malays’) presence on boards has positive impact on dividend yield (dividend payout), and this effect conditional on the level of free cash flows generated by firms. Our results also show that the role of female and Malay directors in forcing controlling shareholders of firms with substantial free cash flows to cash out the firms’ resources through making higher dividend payments is more prominent when the firms’ ownership structure is concentrated in the hand of largest shareholders. The findings of our study, to some extent, support the government calls for increasing the number of women participation on corporate boardrooms and the participation of Malays in corporate sector.
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Hong, Kim, and Fakhruddin Nasution. "PENILAIAN HARGA SAHAM PERUSAHAAN PEMBIAYAAN DI BURSA EFEK INDONESIA." Media Riset Akuntansi, Auditing dan Informasi 12, no. 1 (April 8, 2012): 87. http://dx.doi.org/10.25105/mraai.v12i1.589.
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<span>The purpose of multi finance companies’ stock price valuation is to know their intrinsic <span>values by performing fundamental analysis using dividend discount model, free cash flow to the firm model, free cash flow to equity model, and residual income model. Research data uses secondary data in the period of 2006-2010 which consists of Indonesian Stock Price Composite Index (IHSG), and multi finance companies’ stock prices taken from Yahoo Finance; multi finance companies’ financial statements taken from Indonesian Stock Exchange (BEI) reports; multi finance industry data taken from Bapepam-LK. As a result of research, stock of ADMF is fair valued by using the analysis of dividend<br />discount model; undervalued by using the analysis of free cash flow to the firm and free cash flow to equity models; overvalued by using the analysis of residual income model. Stock of BFIN is undervalued by using the analysis of dividend discount, free cash flow to the firm, and free cash flow to equity models; overvalued by using the analysis of residual income model. Stock of MFIN is overvalued by using the analysis of dividend discount<br />and residual income models; undervalued by using the analysis of free cash flow to the firm and free cash flow to equity models. Statistic t-test shows that there are no significant differences to value stock prices using dividend discount, free cash flow to the firm, free cash flow to equity, and residual income models, therefore investment analyst or investor may use one of the chosen stock price valuation model.<br />Keywords: Multi finance companies, Fundamental analysis, Stock price valuation model, Intrinsic value, Required return, Investment risk<br /></span></span>
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Kadioglu, Eyup, Saim Kilic, and Ender Aykut Yilmaz. "Testing the Relationship between Free Cash Flow and Company Performance in Borsa Istanbul." International Business Research 10, no. 5 (April 24, 2017): 148. http://dx.doi.org/10.5539/ibr.v10n5p148.
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This study tests whether free cash flow affects the performance of firms in the context of the free cash flow hypothesis. The study applies a panel regression method to a data set consisting of 2,175 observations belonging to 370 companies listed in Borsa Istanbul during the period 2009-2015. A significant, negative relationship is found between free cash flow and firm performance measured by Tobin’s Q ratio. Greater free cash flow in the hands of managers leads to the lower performance and, conversely, less free cash flow in the hands of managers leads to higher performance. The results also confirm that leverage and dividend payments have a positive effect on performance. Thus, the results support the free cash flow hypothesis for Turkey.
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Ramakrishnan, Suresh, Saqib Muneer ., and Melati Ahmad Anuar . "An Interaction between Firm Strategy, Capital Structure and Firm’s Performance." Journal of Economics and Behavioral Studies 7, no. 4(J) (August 30, 2015): 37–47. http://dx.doi.org/10.22610/jebs.v7i4(j).592.
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The study tries to determine the association among corporate strategy, social structure and firm performance. In this regard, the monetary reports of 78 companies listed in Karachi Stock Exchange since 2007 to 2014 were scrutinized. In this research, firm strategy (sales growth, liquidity) and capital structure (debt ratio) were used as sovereign variables, and firm performance (return on equity, return on assets, free cash flow for the firm, free cash flow per share) were functional and are used as dependent variables, so to study the affiliation between corporate strategy, capital structure and firm performance within a 8-years period from 2007 to 2014. Secondary data has been used to test the hypotheses; single variable linear regression method was used and their significance was evaluated using Statistics T (t-test) and F (Fisher). The study results indicate that there is a significant positive relationship between sales growth variables and two types (among four types) of performance criteria in the study, namely return on equity and return on assets. And there is a positive significant relationship between firm liquidity and three criteria of firm's performance in the study namely return on equity, free cash flow per share and return on assets. Also, debt ratio has a positive significant relationship with free cash flow for firm and a negative significant relationship with return on assets.
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Hoque, Monzurul, and KC Rakow. "Do voluntary cash flow disclosures and forecasts matter to value of the firms?" Managerial Finance 42, no. 1 (December 31, 2015): 3–12. http://dx.doi.org/10.1108/mf-09-2015-0253.
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Purpose – Two stylized facts emerge from cash flow literature. One explores the link between free cash flow (FCF) to firm value (Jensen, 1986) and establishes that FCF increases firm value. The other posits FCF may be value decreasing as firms tend to over invest when there is high level of FCF (Richardson, 2006). Two camps have opposing views yet together they establish that FCF is value relevant. If FCF or cash flow, in general, is value relevant then managers will be motivated to present forecasts to investors. The paper aims to discuss these issues. Design/methodology/approach – The authors hand collect data from each firm’s press releases and earnings announcements and perform an event study around this date to see how firm forecast and disclosure policies affect firm value. Findings – The analysis demonstrates that disclosures and forecasts do have significantly positive relation with tech firms suggesting that firms in the technology industries are more forthcoming with cash flow disclosures and forecasts in their earnings announcements. The authors further show that these disclosures and forecasts negatively affect the firm value of tech firms. Originality/value – This paper contributes to the literature that there is empirical evidence that cash flow disclosures and forecasts matter to the value of the firm. Further, it posits that unlike understanding the existing views as opposing each other, may be the authors will be better served if they view both of them as right depending on the optimality of forecasts. The future efforts will be directed toward exploring the optimality of cash flow disclosures.
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Wahyuni, Made Dita, and I. Dewa Nyoman Badera. "Ukuran Perusahaan Memoderasi Pengaruh Profitabilitas, Free Cash Flow, dan Likuiditas pada Kebijakan Dividen." E-Jurnal Akuntansi 30, no. 4 (April 23, 2020): 1034. http://dx.doi.org/10.24843/eja.2020.v30.i04.p19.
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Dividend policy is the company's decision to determine whether profits derived by the company will be distributed to shareholders in the form of dividends or will be used as retained earnings. Companies must pay attention to factors in determining dividend policy. This study aims to analyze the iinfluence of the effect of profitability, free cash flow, and liquidity on dividend policy with firm size as a moderating variable. This research was conducted at infrastructure, utilities, and transportation companies listed on the Indonesia Stock Exchange in 2016-2018. The sample research method used was purposive sampling. The data analysis technique used is Moderated Regression Analysis. Based on the results of the study, it is known that profitability and firm size do not affect dividend policy, meanwile free cash flow and liquidity have a positive effect on dividend policy. This study also found that firm size can strengthen the effect of profitability, free cash flow, and liquidity on dividend policy.
Keywords: Profitability; Free Cash Flow; Liquidity; Dividend Policy; Firm Size.
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Tjhoa, Elisa. "PENGARUH FREE CASH FLOW, PERTUMBUHAN PERUSAHAAN, RETURN ON ASSETS, CASH RATIO, DEBT TO EQUITY RATIO DAN FIRM SIZE TERHADAP KEBIJAKAN DIVIDEN (Studi Empiris pada Perusahaan Sektor Industri Barang Konsumsi yang Terdaftar di Bursa Efek Indonesia Periode 2015." Ultimaccounting : Jurnal Ilmu Akuntansi 12, no. 1 (June 19, 2020): 44–67. http://dx.doi.org/10.31937/akuntansi.v12i1.1570.
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Abstract- The company’s decision on the distribution of dividend, as one of the returns expected by investors aside of capital gain, is an important decision due to its impacts on company’s value and shareholders’ wealth. The purpose of this research is to obtain empirical evidence regarding the determinants on Dividend Payout Ratio, namely Free Cash Flow, Company’s Growth, Return on Assets, Cash Ratio, Debt to Equity Ratio, and Firm Size (Empirical Study on Consumption Goods Industry Companies Listed on Indonesia Stock Exchange between 2015-2017). The samples in this study were selected through purposive sampling method and secondary data were analyzed through multiple linear regression methods. In total, 13 companies were used as samples. The result of this study showed Free Cash Flow, Cash Ratio and Firm Size partially have significant and positive effect towards Dividend Payout Ratio, and Company’s Growth has significant and negative effect towards Dividend Payout Ratio. While Return on Assets and Debt to Equity Ratio has no significant effects toward Dividend Payout Ratio. Free Cash Flow, Company’s Growth, Return on Assets, Cash Ratio, Debt to Equity Ratio and Firm Size simultaneously have significant effect toward Dividend Payout Ratio (DPR).
Keywords: Cash Ratio, Debt to Equity Ratio, Dividend Payout Ratio, Firm Size, Free Cash Flow, Growth, Return on Assets
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F. Ukhriyawati, Catur, Tri Ratnawati, and Slamet Riyadi. "The Influence of Asset Structure, Capital Structure, Risk Management and Good Corporate Governance on Financial Performance and Value of The Firm through Earnings and Free Cash Flow As An Intervening Variable in Banking Companies Listed in Indonesia Stock Exchange." International Journal of Business and Management 12, no. 8 (July 18, 2017): 249. http://dx.doi.org/10.5539/ijbm.v12n8p249.
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Banking companies that have gone public has the goal of increasing prosperity of the owners or shareholders by increasing the value of the company. The value of the company is very important because of the high value of the company which will be followed by a high prosperity shareholders. This study aimed to analyze the influence of asset structure, capital structure, risk management and good corporate governance on financial performance and value of the firm through earnings and free cash flow as an intervening variable in banking companies listed in Indonesia Stock Exchange. Data analysis techniques use Partial Least Square (PLS) and from data processing and hypothesis testing, produced 13 accepted hypothesis and 8 hypothesis is rejected. The results of this study were (1) asset structure influence positive and significantly to earnings, (2) capital structure influence negative and significantly to earnings, (3) risk management influence positive and no significantly to earnings, (4) Good Corporate Governance influence positive and significantly to earnings, (5) asset structure influence positive and significantly to free cash flow, (6) capital structure influence positive and no significantly to free cash flow, (7) risk management influence negative and no significantly to free cash flow, (8) Good Corporate Governance influence positive and no significantly to free cash flow, (9) asset structure influence negative and no significantly to financial performance, (10) capital structure influence negative and significantly to financial performance, (11) risk management influence positive and no significantly to financial performance, (12) Good Corporate Governance influence positive and significantly to financial performance, (13) asset structure influence positive and significantly to value of the firm, (14) capital structure influence positive and no significantly to value of the firm, (15) risk management influence negative and significantly to value of the firm, (16 ) Good Corporate Governance influence positive and significantly to value of the firm, (17) earnings influence positive and significantly to financial performance, (18) free cash flow influence positive and significantly to financial performance, (19) earnings influence positive and significantly to value of the firm, (20) free cash flow influence positive and no significantly to value of the firm and (21) financial performance influence positive and significantly to value of the firm.
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Alberro, José. "Estimating Damages Using DCF: From Free Cash Flow to the Firm to Free Cash Flow to Equity (and Back)." ICSID Review 30, no. 3 (July 3, 2015): 689–98. http://dx.doi.org/10.1093/icsidreview/siv020.
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Portal, Márcio Telles, and Leonardo Fernando Cruz Basso. "The effect of family control and management on performance, capital structure, cash holding, and cash dividends." Corporate Ownership and Control 13, no. 1 (2015): 1134–49. http://dx.doi.org/10.22495/cocv13i1c10p2.
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This study investigates the effect of family firm on corporate performance and financial policy (capital structure, cash holding, and cash dividends). Using a sample of Brazilian firms, the study uses a treatment effect model to address self-selection and endogeneity problems. The results show that family firm has a negative net effect on performance. Family control has an effect on financial policies that indicate a aversive behavior to preserve control. The results indicate less problem of free cash flow and more risk-taking behavior in family-manage companies, suggesting that such aversion behavior is reduced when the family controls and manages the firm. This is the first study that takes into account the effect of family firm behavior through multiple financial policies
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Crisóstomo, Vicente Lima, and José Wellington Brandão. "Nonfinancial Firms as Large Shareholder Use Dividend Policy for Management Monitoring in Brazil." Future Studies Research Journal: Trends and Strategies 10, no. 1 (April 1, 2018): 109–31. http://dx.doi.org/10.24023/futurejournal/2175-5825/2018.v10i1.339.
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The paper analyzes whether nonfinancial firms as large blockholders of the Brazilian firm shape dividend policy. Under the Agency Theoretical framework a set of good corporate governance practices is suggested as able to control management activity and prevent managers from incurring in moral hazard problems and the emergence of excessive management power as predicted by the Managerial Power Hypothesis. In this context, the Management Monitoring Hypothesis proposes that dividend policy may be used as a management control mechanism given that dividend distribution affects the free cash flow available for managers. Dividend models were estimated by the Generalized Method of Moments (GMM) for an unbalanced panel data, composed of 1.890 firm-year observations of 234 companies listed on the BM&FBovespa, in the period 1996-2012. The results indicate that nonfinancial firms as large shareholders increase dividend payout which leads to the reduction of free cash flow. This result is in accordance with the monitoring hypothesis which predicts the reduction of free cash flow available for managers through dividend policy.
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Pontoh, Winston, and Novi Swandari Budiarso. "Firm characteristics and capital structure adjustment." Investment Management and Financial Innovations 15, no. 2 (May 17, 2018): 129–44. http://dx.doi.org/10.21511/imfi.15(2).2018.12.
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The adjustment for the firm capital structure is unclear from perspectives of trade-off theory, pecking order theory, life cycle theory, market timing theory, and free cash flow theory, since many research findings contradict each other. Adjustments for the capital structure are complex, since the conditions for each firm are different. The objective of this study is to provide empirical evidence of how firms adjust capital structure in relationship with maturity in context of trade-off, pecking order, free cash flow, and market timing theory. In terms of hypotheses testing, this study conducts logistic regression analysis with 138 Indonesian public firms as the sample in the observed period from 2010 to 2015. To distinguish the results, this study controls the sample by size and age based on the median. The study reports that preferences for the source of funds based on the cost of capital, internal conflict, and firm maturity indicate adjustments for the firm capital structure. Based on Indonesian firms, the form of capital structure in developing countries can refer to a single model or a combination of the trade-off model and pecking order model, as well as market timing.
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Rofizar, Heny, Muhammad Arfan, and Faisal Faisal. "PENGARUH ARUS KAS BEBAS, PERTUMBUHAN PERUSAHAAN DAN PROFITABILITAS TERHADAP FINANCIAL LEVERAGE (Studi pada Perusahaan Manufaktur yang Terdaftar di Bursa Efek Indonesia)." JURNAL PERSPEKTIF EKONOMI DARUSSALAM 6, no. 1 (April 21, 2020): 1–14. http://dx.doi.org/10.24815/jped.v6i1.16415.
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AbstractThe objective of this research is to examine the influence of free cash flow, firm growth, and profitability on financial leverage of manufacturing companies listed in Indonesian Stock Exchange for the period 2011 to 2015. Out of 121 manufacturing companies, 34 companies were selected as sample using purposive samping technique and then it estimated using path analysis. The results of this research show that: (1) free cash flow have positive influence towards financial leverage; (2) firm growth have positive influence towards financial leverage; and (3) profitability have negative influence towards financial leverage. These findings implied that in managing the financial leverage, the manufacturing companies should deliberate the importance of free cash flow, firms growth, and profitability. Keyword: Financial Leverage, Free Cash Flow, Firms Growth, and Profitability AbstrakTujuan dari penelitian ini adalah untuk menguji pengaruh arus kas bebas, pertumbuhan perusahaan, dan profitabilitas terhadap financial leverage pada perusahaan manufaktur yang terdaftar di Bursa Efek Indonesia tahun 2011-2015. Dari 121 perusahaan manufaktur, 34 perusahaan dipilih menjadi sampel penelitian dengan menggunakan metode purposive sampling dan kemudian diestimasi dengan menggunakan analisis jalur. Hasil pengujian menunjukkan bahwa: (1) arus kas bebas berpengaruh positif terhadap financial leverage; (2) pertumbuhan perusahaan berpengaruh positif terhadap financial leverage; dan (3) profitabilitas berpengaruh negatif terhadap financial leverage. Temuan penelitian ini bermakna bahwa dalam mengelola financial leverage, perusahaan manufaktur harus mempertimbangkan pentingnya arus kas bebas, pertumbuhan perusahaan, dan profitabilitas dari perusahaan tersebut.
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Graciosa, Amelia, Gracia Gracia, and Rita Juliana. "Firm Life Cycle and Investment Inefficiency." Journal of Accounting and Strategic Finance 3, no. 2 (November 30, 2020): 169–84. http://dx.doi.org/10.33005/jasf.v3i2.86.
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This paper investigates whether the firm's life cycle stages carry out free cash flow efficiently or not before their investment performance. We utilize cash flow patterns to classify firms into five several life cycles stages. Our data consists of non-financial firms listed in Indonesia Stock Exchange from 2008-2018. We find evidence that Indonesian firms in the introduction, growth, and shakeout stage are underinvesting. This paper also shows that firms in decline stage are overinvested. The characteristic of the mature firm includes that firms with high cash flow will tend to overinvest. However, contrasting with mature firms' common characteristics, our results show that Indonesian firms in maturity stage tend to underinvest. The results also imply that the government should acknowledge the existence of Indonesian firms' investment inefficiency problem. Overall, this paper contributes to the literature by providing empirical evidence on Indonesia's investment inefficiency phenomena. It is suggested that further research may select a different method in calculating growth opportunities and may also study private firms since it tends to have higher financial constraints.
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Hand Prastya, Andre, and Fitri Yani Jalil. "PENGARUH FREE CASH FLOW, LEVERAGE, PROFITABILITAS, LIKUIDITAS DAN UKURAN PERUSAHAAN TERHADAP KEBIJAKAN DIVIDEN." Current: Jurnal Kajian Akuntansi dan Bisnis Terkini 1, no. 1 (March 22, 2020): 132–49. http://dx.doi.org/10.31258/jc.1.1.132-149.
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The purpose of this research is to find the effects of free cash flow, leverage, profitability, liquidity and firm size to dividend policy. This research using a sample of 21 LQ 45 companies registered in BEI 2015-2017. The method used is purposive sampling. Hypothesis testing in this research using multiple linear regression analysis. The result of this research show leverage, profitability, and firm size significantly affect the dividend policy. While free cash flow and liquidity have no effect on dividend policy
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Dickinson, Victoria. "Cash Flow Patterns as a Proxy for Firm Life Cycle." Accounting Review 86, no. 6 (July 1, 2011): 1969–94. http://dx.doi.org/10.2308/accr-10130.
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ABSTRACT This study develops a firm life cycle proxy using cash flow patterns. The patterns provide a parsimonious indicator of life cycle stage that is free from distributional assumptions (i.e., uniformity). The proxy identifies differential behavior in the persistence and convergence patterns of profitability. For example, return on net operating assets (RNOA) does not mean-revert (spread of 7 percent after five years between mature and decline firms) when examined by life cycle stage, which has implications for growth rates and forecast horizons. Further, determinants of future profitability such as asset turnover and profit margin are differentially successful in generating increases in profitability conditional on life cycle stage. Finally, investors do not fully incorporate the information contained in cash flow patterns and, as a result, undervalue mature firms. The cash flow proxy is a robust tool that has applications in analysis, forecasting, valuation, and as a control variable for future research. Data Availability: All data are available from public sources identified in the paper.
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Wijaya, Novia, and Agathon Felix. "Factors Affecting Dividend Policy on Non-Financial Companies in Indonesia." GATR Accounting and Finance Review 2, no. 3 (July 20, 2017): 18–25. http://dx.doi.org/10.35609/afr.2017.2.3(3).
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Objective - The objective of this study is to obtain empirical evidence and analyse the factors that affect the dividend policy of non-financial firms listed on the Indonesian Stock Exchange. The factors studied include liquidity, leverage, growth, price/earnings, size, earnings per share, price to book ratio, ownership, age of the firm, floating rate, profitability, and free cash flow. Methodology/Technique - The sampling method used in this study is purposive sampling, in which the samples are taken based on suitable characteristics of the population to generate representative samples. The total number of samples in this study are 105 non-financial firms listed on the Indonesian Stock Exchange between 2011 and 2015. The hypothesis is tested by using multiple regression analysis. Findings - The results of this study show that earnings per share, price to book ratio, and floating rate affect the dividends policy while liquidity, leverage, growth, price/earnings, size, ownership, age of the firm, profitability, and free cash flow has no effect on dividend policy. Novelty - The study findings contribute the companies to establish an appropriate dividend policy to satisfy the interest of both parties that is companies future growth and its investors. Type of Paper: Empirical Keywords: Dividend Policy; Price to Book Ratio; Ownership; Age of the Firm; Floating Rate; Free Cash Flow. JEL Classification: G32, G35, M41.
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Cheng, Ming-Chang, and Zuwei-Ching Tzeng. "Effect of Leverage on Firm Market Value and How Contextual Variables Influence this Relationship." Review of Pacific Basin Financial Markets and Policies 17, no. 01 (March 2014): 1450004. http://dx.doi.org/10.1142/s0219091514500040.
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Using the financial data from 645 companies that were listed in the Taiwan Stock Exchange (TSE) between 2000 and 2009, this paper applied a least square dummy variable (LSDV) model to estimate the effect of leverage on firm market values and examine how contextual variables influence this relationship. The empirical results are as follows. First, the values of leveraged firms are greater than the values of unleveraged firms if we do not consider the probability of bankruptcy. If we simultaneously consider the benefits and costs of debt, we find that leverage is positively related to the firm value until a firm has issued sufficient debt to attain its optimal capital structure. Second, the positive influence of leverage on the firm value tends to be stronger for firms of higher financial quality (firms with greater Z-scores), firms with greater growth opportunities and firms with higher corporate tax rates. Third, the negative influence of leverage on firm value tends to be strengthened if increases occur in a firm's free cash flow, a firm's non-debt tax rate, or the inflation rate it experiences. Finally, leverage may also have a positive effect on firm value provided that a firm with a higher free cash flow, a higher corporate rate or a higher inflation, is able to properly capitalize on the resultant opportunities. These findings provide insight into firms' debt financing decisions, helping firms to maximize their values.
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Al-Zararee, Abdul, and Abdulrahman Al-Azzawi. "The Impact of Free Cash Flow on Market Value of Firm." Global Review of Accounting and Finance 5, no. 2 (September 2014): 56–63. http://dx.doi.org/10.21102/graf.2014.09.52.04.
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Brush, Thomas H., Philip Bromiley, and Margaretha Hendrickx. "The free cash flow hypothesis for sales growth and firm performance." Strategic Management Journal 21, no. 4 (April 2000): 455–72. http://dx.doi.org/10.1002/(sici)1097-0266(200004)21:4<455::aid-smj83>3.0.co;2-p.
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Rajhans, Rajni Kant. "Godrej properties: valuation using the capital cash flow technique." Emerald Emerging Markets Case Studies 10, no. 3 (September 9, 2020): 1–23. http://dx.doi.org/10.1108/eemcs-01-2020-0026.
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Learning outcomes The case is focused to meet the following learning objectives: the readers will be able to recall basic cash flow estimation concepts; and the readers will be able to explain various features of capital cash flow (CCF). The participants will be able to implement the CCF model in real estate firm valuation. The participants will be able to compare CCF and free cash flow to the firm (FCFF) models. The participants will be able to evaluate the benefits of CCF over FCFF. The readers will be able to construct the CCF valuation model for firm valuation. Case overview/synopsis On 19th April 2019, Mr Kai, an analyst tracking real estate firms was excited to present to his team a new robust technique of firm valuation suitable for real estate companies, namely, the CCF technique and was also keen to deliberate on its application. Though the investment scope using this technique could be located in Godrej properties (GP), a reputed brand and the largest listed real estate developer by sales in 2018, yet, he was concerned about the assumptions of growth of real estate industry in India, in general, and the GP in particular. Importantly, this was because the real estate market in India was undergoing many structural changes. For instance, the buyers’ preferences were changing and unsold inventory in the industry was at its peak. Under these market conditions, an announcement was made by GP about a target return on equity of 20% in 2018–2023 expecting a dominant place in the real estate market in India, which also carried the threat of jeopardizing the reputation of GP, if under any circumstance the target was not accomplished. Complexity academic level Masters program. Supplementary materials Teaching notes are available for educators only. Subject code CSS: 11 Strategy.
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Sakinah, Gina, and Ade Ponirah. "PENGARUH PSAK NO. 1 TENTANG PENYAJIAN LAPORAN CASH FLOW DAN CAPITAL EXPENDITURE TERHADAP FIRM VALUE PADA PERUSAHAAN YANG BERGERAK DI BIDANG CONSUMER GOOD YANG TERDAFTAR DI JAKARTA ISLAMIC INDEX PERIODE 2010-2019." AKSY: Jurnal Ilmu Akuntansi dan Bisnis Syariah 3, no. 1 (July 16, 2021): 49–58. http://dx.doi.org/10.15575/aksy.v3i1.12135.
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Financial statements are prepared and presented to be submitted to those who need them. Of course, in this presentation must be in accordance with the existing provisions that are stipulated in PSAK No. 1 concerning the presentation of financial statements. Firm Value has an important role because it will form an image for the company, firm value is created by the contribution of other factors. Operation Cash Flow informs cash inflows and cash outflows from a company. Capital Expenditure as a reserve fund to support the expansion of the company or the improvement of assets. This research uses descriptive methods and quantitative approaches using secondary data supported by literature and documentation studies. The results showed that Operation Cash Flow partially has a positive and significant effect on Firm Value as well as Capital Expenditure has a positive and significant effect on Firm Value. Simultaneously both free variables can contribute and are able to significantly affect firm value.Keywords: Operation Cash Flow, Capital Expenditure, Firm Value
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Fadly Bahrun, Muhammad, Tifah Tifah, and Amrie Firmansyah. "Pengaruh Keputusan Pendanaan, Keputusan Investasi, Kebijakan Dividen, Dan Arus Kas Bebas Terhadap Nilai Perusahaan." Jurnal Ilmiah Akuntansi Kesatuan 8, no. 3 (December 7, 2020): 263–76. http://dx.doi.org/10.37641/jiakes.v8i3.358.
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This study examines the effect of funding decisions, investment decisions, dividend policies, and free cash flow on firm value. The samples used in this study are consumer goods industry companies listed on the Indonesia Stock Exchange (IDX) during 2016-2019. Based on purposive sampling, the selected sample is 34 companies, so that the total sample is 136 observations. Hypothesis testing is carried out using multiple linear regression analysis of panel data. The test results show that funding decisions positively affect firm value, while investment decisions do not affect firm value. This study also shows that dividend policy and free cash flow have a negative effect on firm value.
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Miglo, Anton. "Zero-Debt Policy under Asymmetric Information, Flexibility and Free Cash Flow Considerations." Journal of Risk and Financial Management 13, no. 12 (November 28, 2020): 296. http://dx.doi.org/10.3390/jrfm13120296.
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We build a model of debt for firms with investment projects, for which flexibility and free cash flow problems are important issues. We focus on the factors that lead the firm to select the zero-debt policy. Our model provides an explanation of the so-called “zero-leverage puzzle”. It also helps to explain why zero-debt firms often pay higher dividends when compared to other firms. In addition, the model generates new empirical predictions that have not yet been tested. For example, it predicts that firms with zero-debt policy should be influenced by free cash flow considerations more than by bankruptcy cost considerations. Additionally, the choice of zero-debt policy can be used by high-quality firms to signal their quality. This is in contrast to most traditional signalling literature where debt serves as a signal of quality. The model can explain why the probability of selecting the zero-debt policy is positively correlated with profitability and investment size and negatively correlated with the tax rate. It also predicts that firms that are farther away from their target capital structures are less likely to select the zero-debt policy when compared to firms that are close to their target levels.
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Septyaningsih, Vivi, and Asep Risman. "The Effect of Profitability and Free Cash Flow on Capital Structure Moderated by Firm Size (Studyon Food and Beverage Sub-Sector Companies on the IDXin 2011-2018)." Sumerianz Journal of Business Management and Marketing, no. 43 (July 24, 2021): 64–73. http://dx.doi.org/10.47752/sjbmm.43.64.73.
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This study aims to analyze the effect of profitability and free cash flow on capital structure with firm size as a moderating variable. The population in this study is the food and beverage sub-sector company on the IDX in 2011-2018. The sample used was 9 companies, which were selected based on the purposive sampling method. The data analysis technique used is multiple linear regression analysis and residual test.The results showed that the profitability variable had no effect on capital structure. While the free cash flow variable has a positive and significant effect on capital structure. In the moderation test with the residual test approach, firm size does not moderate the relationship between profitability and free cash flow on the capital structure
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Khidmat, Waqas Bin, and Mobeen Ur Rehman. "The impact of free cash flows and agency costs on firm performance — An empirical analysis of KSE listed companies of Pakistan." Journal of Financial Engineering 01, no. 03 (September 2014): 1450027. http://dx.doi.org/10.1142/s2345768614500275.
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The purpose of this research is to find out the impact of free cash flows and agency costs on firm performance in KSE listed companies of Pakistan. A sample of 123 companies listed on KSE representing eight different sectors has been analyzed to determine the association of free cash flows, agency costs and firm performance with each other. For the purpose of analysis, secondary data of selected companies for the period 2003–2009 has been taken from balance sheet analysis of joint stock companies (BSA) issued by State Bank of Pakistan (SBP). Free cash flows have been calculated as by Poulsen (1993) and Lang et al. (1991) while four proxy variables for agency costs are used (Wang, 2010) to assess their relationship with each other and with the firm performance. Results showed that there is a significantly positive relationship between free cash flows and agency cost. Free cash flows have significantly negative impacts on firm performance. The study also shows a significantly negative impact of agency cost on firm performance with exception to total asset turnover (TATO) ratio which has a positive impact. In Pakistani context, the minority shareholders are exploited by the majority shareholders and the management so the government with the help of this study can devise such rules of corporate governance in which the agency cost can be controlled. The investors also are benefitted from this study as they can efficiently manage their portfolio while looking at the impacts of agency costs and firms free cash flows. So this study enables us to better understand the linkage between agency cost, free cash flows and performance measures.
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Vafeas, Nikos. "Determinants of the Choice between Alternative Share Repurchase Methods." Journal of Accounting, Auditing & Finance 12, no. 2 (April 1997): 101–24. http://dx.doi.org/10.1177/0148558x9701200201.
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This study provides an empirical examination of the determinants of the choice between alternative share repurchase methods. It is shown that the likelihood of selecting a self-tender offer over an open market share repurchase increases with the repurchasing firm's agency costs of free cash flow, inside ownership percentage, leverage, prebuyback stock performance, and the magnitude of cash involved in the transaction. The empirical evidence is consistent with the free cash flow, information-signaling, and managerial entrenchment hypotheses contributing toward explaining the choice of repurchase method among firms. The study concludes that the two repurchase methods appear to serve different purposes for the repurchasing firm.
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Maharani, Bunga, and Dwi Ratna Wulandari. "FAKTOR FUNDAMENTAL YANG MEMPENGARUHI PERUBAHAN HARGA SAHAM (Studi Empiris pada Perusahaan Finansial yang Terdaftar Di BEI Tahun 2009dan 2010)." JURNAL AKUNTANSI UNIVERSITAS JEMBER 11, no. 1 (March 31, 2015): 13. http://dx.doi.org/10.19184/jauj.v11i1.1258.
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The objective of the study is to investigate the effect of free cash flow, return on equity, current ratio, firm size and net profit margin on dividend policy that measured by dividend payout ratio. The population of this study are all manufacturing companies listed on the Indonesian Stock Exchange (IDX).The period of this study are 2008-2011. Based on purposive sampling method, 19 companies were used on the study. The sample were gathered from annual reports and ICMD. This study used multiple linear regression as analysis method with 5% significant level. The results of the study indicate that free cash flow and return on equity have positive effect on dividend policy, while current ratio, firm size and net profit margin have no significant effect on dividend policy.
Keywords: Dividend Policy, dividend payout ratio (DPR), free cash flow (FCF), return on equity (ROE), current ratio (CR), firm size (FZ) and net profit margin (NPM).
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Scott, Ricky William. "Do Institutional Investors Aleviate Agency Costs in R&D Investment Decisions?" Accounting and Finance Research 6, no. 3 (July 6, 2017): 24. http://dx.doi.org/10.5430/afr.v6n3p24.
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This study tests whether institutional investors encourage R&D investment in firms with potential agency problems. Firm and year fixed effect regressions and difference-GMM regressions are used to examine the effect of changes in institutional investor levels to subsequent changes in R&D investment levels. Increased institutional ownership leads to increased R&D investment and this relationship is stronger in firms more susceptible to agency problems. Agency-based free cash flow theory predicts that institutional investors will encourage R&D investment in firms with good investment opportunities, but they will not encourage R&D investment simply because a firm has higher free cash flow. My results support this prediction indicating that institutional investors help to control agency problems in R&D investment decisions. The results in this paper indicate that this may lead to a decrease in agency costs in R&D decisions, thus benefiting institutional and non-institutional shareholders.
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Ahmed AL-Dhamari, Redhwan, and Ku Nor Izah Ku Ismail. "An investigation into the effect of surplus free cash flow, corporate governance and firm size on earnings predictability." International Journal of Accounting and Information Management 22, no. 2 (April 29, 2014): 118–33. http://dx.doi.org/10.1108/ijaim-05-2013-0037.
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Purpose – Existing studies on corporate governance mainly focus on how a strong governance system enhances the valuation of firms with cash holding or free cash flow agency problem. The aims of this paper are threefold. First, it investigates the impact of surplus free cash flows (SFCF) on earnings predictability. Second, it investigates whether corporate governance variables moderate the negative impact of SFCF on earnings predictability. Finally, this study examines whether the ability of corporate governance to mitigate SFCF and improve the predictive value of earnings varies between large and small firms. Design/methodology/approach – This paper uses heteroskedasticity-corrected least square regressions upon a sample of Malaysian listed firms. Findings – This paper finds that firms with high SFCF experience less earnings predictability. It also indicates that earnings of firms with high SFCF are more predictable when institutional investors hold a large stake of shares and when a chairperson is independent. Finally, this paper reveals that the role of institutional and managerial ownership in mitigating agency conflict of free cash flow and improving earnings predictability is more prominent in larger firms. This study implies that investors still have reservations about the ability of boards to enhance earnings numbers in Malaysia, although efforts were taken to reform the corporate governance mechanisms following the Asian financial crisis. Originality/value – This research is considered as the first attempt to examine the relationships between SFCF, corporate governance, firm size, and earnings predictability in a developing county such as Malaysia. The findings of this paper serve as a wake-up call to policy makers to evaluate the importance of governance structure in enhancing earnings predictability in emerging economies.
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Buus, Tomáš. "A GENERAL FREE CASH FLOW THEORY OF CAPITAL STRUCTURE." Journal of Business Economics and Management 16, no. 3 (December 22, 2014): 675–95. http://dx.doi.org/10.3846/16111699.2013.770787.
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This paper provides general framework for handling time-varying cost of capital, leverage, tax rates, and capital values in a dynamic free cash flow theory of capital structure. That enables efficient analysis of the recent competing theories of capital structure. After including the costs of financial distress and risk premium of debt in the cash flow model, this paper provides a new look at cost of tax shield from the point of view of risk-return relationship. Cost of tax shield is not constant, but depends on leverage and is mostly between cost of assets and cost of debt. Moreover the simulation of firm value and capital structure in presence of taxes, risk, and growth shows that unique optimal leverages exist for each combination of the above factors. The risk-enhanced cash flow theory can explain both the observations, which support pecking order theory, free cash flow theory and tradeoff theory of capital structure. Moreover it fits some evidence, which resists these theories: highly leveraged low growth companies and moderately leveraged large profitable companies.
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Saravia Matus, Jimmy A. "The lifecycle of the firm, corporate governance and investment performance." Corporate Ownership and Control 11, no. 2 (2014): 224–38. http://dx.doi.org/10.22495/cocv11i2c1p6.
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According to firm lifecycle theory the agency costs of free cash flows are not transitory problems but are a persistent issue for mature firms. This paper extends the theory by suggesting that to neutralize the threat of takeover the controlling parties of maturing firms progressively deploy antitakeover provisions, and this allows them to overinvest safely and prevent retrenchment. Another contribution of this paper is to develop a new empirical index that permits the identification of mature corporations with governance problems due to agency costs of free cash flows. Empirical results show that as firms mature free cash flows increase, more antitakeover provisions are put into place and negative net present value projects are undertaken.
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Hsu, Feng Jui. "Does corporate social responsibility extend firm life-cycles?" Management Decision 56, no. 11 (November 12, 2018): 2408–36. http://dx.doi.org/10.1108/md-09-2017-0865.
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Purpose The purpose of this paper is to assess US-based firms from 2005 to 2015 to determine whether firms with better corporate social responsibility (CSR) performance will allocate capital through their life-cycle to better maintain or extend total assets. Design/methodology/approach Kinder, Lydenberg, Domini Research & Analytics social performance rating scores were used to measure CSR performance in an initial sample of 19,707 firm-year observations. Firms are first classified into stages including introduction, growth, maturity, and decline, and use multiclass linear discriminant analysis, the Dickinson classification scheme (Dickinson, 2011), and the ratio of retained earnings to total assets (RETA) as life-cycle proxies. Life-cycle was formulated based on a broad set of accounting data sourced from Compustat. Various corporate characteristics from the CRSP database were used to classify all sample firms into five equal groups based on their CSR performance. Findings A firm’s equity and debt issuance assume a hump shape over the life-cycle under CSR practice, and higher-CSR firms face fewer significant issues as they mature; payout, RETA, and free cash flow decreased from high-CSR performance firms to low-CSR performance firms; and cash holdings also exhibit a hump shape over the life-cycle and higher-CSR practices are associated with significantly lower cash holdings. Originality/value CSR performance is a useful predictor for forecasting firm life-cycle and superior CSR performance ensures efficient capital allocation throughout firm life-cycle. Furthermore, CSR practice is an indicator of firm life-cycle sustainability and indicates a firm’s future cash flow patterns.
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Fakhroni, Zaki, Imam Ghozali, Puji Harto, and Etna Nur Afri Yuyetta. "Free cash flow, investment inefficiency, and earnings management: evidence from manufacturing firms listed on the Indonesia Stock Exchange." Investment Management and Financial Innovations 15, no. 1 (March 21, 2018): 299–310. http://dx.doi.org/10.21511/imfi.15(1).2018.25.
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The study aims to test investment inefficiency of fixed assets in mediating the relationship between free cash flow and earnings management and to test the controlling shareholders in moderating the relationship between free cash flow and fixed assets investment inefficiency. The research problem proposed in this study is whether the use of free cash flow for the investment inefficiency of fixed assets is able to ultimately improve the managerial performance. This research investigates new empirical evidence related to management earnings practices caused by free cash flow fixed assets investment inefficiency. The study was conducted on all the manufacturing firms listed on the Indonesia stock exchange from 2010 to 2015. The data used are secondary data in the form of the firms’ financial statements. Using purposive sampling, 314 units were analyzed from 69 manufacturing firms. The estimation of the path model was completed using Structural Equation Modeling (SEM) by WarpPLS program version 5.0. The results showed that free cash flow is positively related to earnings management. Fixed assets investment inefficiency is able to mediate the relationship between free cash flow and earnings management.
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Jimmy, Jimmy, Jesslyn Minerva, Kerlyn Kerlyn, Lisa Lisa, and Ferdinand Napitupulu. "Pendekatan Arsitektur Modern Minimalis pada Bangunan Perkantoran." Jurnal Indonesia Sosial Teknologi 2, no. 4 (April 21, 2021): 622–38. http://dx.doi.org/10.36418/jist.v2i4.136.
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Penelitian iniibertujuan untukimengujiiapakah FreeiCashiFlow, Leverage, Likuiditas, dan Firm Size berpengaruh terhadap Kebijakan Deviden pada perusahaan property dan real estate yang terdaftar di BEI. Jenis penelitian yang digunakaniadalahipenelitianikuantitatif karenaidataiyangidigunakaniadalah angka –angkaisedangkan sifatipenelitianiiniiadalahipenelitian deskriptif. Populasiidalam penelitian ini berjumlah 61 perusahaan property dan real estate yang terdaftar di Bursa Efek Indonesia. Sampel penelitian yangidigunakaniberupa laporanikeuangan perusahaan sektor Property dan RealiEstateiyangiterdaftaridi BEIidenganijumlah 14 perusahaan dari tahun 2017i– 2019. Jenis data yang digunakan dalam penelitian ini adalah data sekunder yang diperoleh dari situs resmi BEI yaitu www.idx.co.id. Terdapat 4 variabel independen dalam penelitian ini yaitu X1 (Free Cash Flow), X2 (Leverage), X3 (Likuiditasi), iX4 (Firm Size) dan variabel dependennya yaitu Y (Kebijakan Deviden). Hasil penelitian ini menunjukkan bahwa Free Cash Flow berpengaruh secara negatif dan signifikan terhadap kebijakan deviden pada perusahaan property dan real estate. Leverage berpengaruh secara negatif dan signifikan terhadap kebijakan deviden pada perusahaan property dan real estate. Likuiditas berpengaruh secara positif dan tidak signifikan terhadap kebijakan deviden pada perusahaan property dan real estate. Firm Size berpengaruh secara positif dan tidak signifikan terhadap kebijakan deviden pada perusahaan property dan real estate. Free Cash Flow, Leverage, Likuiditas, dan Firm Size berpengaruh secara simultan terhadap kebijakan deviden pada perusahaan property dan real estate.
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Alshammari, Turki. "Cash level and corporate performance: evidence from the Gulf Cooperation Council countries." Investment Management and Financial Innovations 17, no. 4 (October 26, 2020): 14–24. http://dx.doi.org/10.21511/imfi.17(4).2020.02.
Full textAbstract:
This study aims to examine the connection between cash level and corporate performance, as well as the cash level determinants for all nonfinancial firms in the Gulf Cooperation Council (GCC) countries. The empirical analysis employs numerous statistical techniques such as panel regression models and the Generalized Methods of Moments (GMM). The main result of the study confirms a positive relationship between the cash level and both the corporate performance and the firm value, which signifies the role of cash in supporting the corporate productive activities in times of rare cash. The results also show that large firms, especially those with less leverage, experience better corporate performance. Additionally, the results demonstrate that when using different levels of cash holdings as well as different levels of firm size, both the magnitude and the significant positive effect of the cash level on corporate performance and firm value are not altered. For the determinants of the cash level, the results confirm that the most important variables are product competition, free cash flow, corporate liquidity, capital expenditures, and financial constraints. The results do not confirm that the amount of dividend paid has a significant influence on the cash level. All results are robust to the various econometric specifications employed in this study. AcknowledgmentThis study is supported by Kuwait University research sector, grant number IF-03/18.