Free cash flow, ownership structure, and capital structure: Impact on agency cost

The paper examines the influence of agency theory on dividend policies with free cash flow,maturity, capital structure, and ownership dividend variables. The sample used in this research isIndonesian listed companies with observation period from 2010 to 2013, and the data collectiontechnique used is data pooling or merging data. The data is analyzed with multiple linearregression analysis in SPSS program. The result of this study indicates that free cash flow,maturity, and ownership structure do not influence devidend policies, however capital structureinfluences dividend policies in Indonesian listed companies. The research also implies thatagency cost theory, as the main model of relevance dividend preposition, cannot explaindividend policies in Indonesian Companies. The investors cannot rely solely on dividend policiesin term of investment decisions in the future.

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OWNERSHIP STRUCTURE, DIVIDEND PAYMENT, AGENCY COST AND CORPORATE VALUE (SUATU PENGUJIAN MODEL STRUKTURAL)

EKUITAS (Jurnal Ekonomi dan Keuangan) ◽

10.24034/j25485024.y2010.v14.i1.2114 ◽

2017 ◽

Vol 14 (1) ◽

pp. 39

Author(s):

Isti Fadah

Keyword(s):

Structural Equation Model ◽

Cash Flow ◽

Ownership Structure ◽

Structural Equation ◽

Agency Cost ◽

Equation Model ◽

Free Cash Flow ◽

Corporate Value ◽

Dividend Payment ◽

Cash Flow Risk

The agency problem come because of separation between ownership and management on large corporate, there is a conflict between shareholder as an owner and manager as an agent. Manager focus on high growth of corporate (low dividend) but the owner prefer high dividend. The aims of the research are (1) to analysis the effect of free cash flow, risk and ownership structure to dividend payment ,(2) to analysis the effect of free cash flow, risk and ownership structure to agency cost. (3) to analysis the effect of dividend payment to corporate value, and (4) to analysis the effect of and agency cost to corporate value The technique sampling is purposive sampling. Secondary data is used in this research. It is from financial report like balance sheet, financial statement and cash flow report. It is gotten from Indonesian Stock Exchange. The research period is 2000 up to 2006. It uses pooled data ( joint of time series data and cross section data) so the analysis units are 271 (n=271). To Analysis data is used descriptive analysis and also statistical analysis that’s name structural equation model (SEM). It uses structural equation model (SEM) because the model has a ladder causality relationship and several variable like ownership structure, agency cost, risk , dividend payment and corporate value are latent variables. The results show that (1) risk has a positive significant effect to the agency cost, It means that agency cost can reduce the risk especially high risk investment that manger can do. (2) Dividend payment has a positive significant effect to the corporate value, It supports the-birds-in-the-hand theory and (3) risk has a positive significant effect to the corporate value. It means that investor always care about risk of corporate where they will invest.

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OWNERSHIP STRUCTURE, DIVIDEND PAYMENT, AGENCY COST AND CORPORATE VALUE (SUATU PENGUJIAN MODEL STRUKTURAL)

EKUITAS (Jurnal Ekonomi dan Keuangan) ◽

10.24034/j25485024.y2010.v14.i1.199 ◽

2018 ◽

Vol 14 (1) ◽

Author(s):

Isti Fadah

Keyword(s):

Structural Equation Model ◽

Cash Flow ◽

Ownership Structure ◽

Structural Equation ◽

Agency Cost ◽

Equation Model ◽

Free Cash Flow ◽

Corporate Value ◽

Dividend Payment ◽

Cash Flow Risk

The agency problem come because of separation between ownership and management on large corporate, there is a conflict between shareholder as an owner and manager as an agent. Manager focus on high growth of corporate (low dividend) but the owner prefer high dividend. The aims of the research are (1) to analysis the effect of free cash flow, risk and ownership structure to dividend payment ,(2) to analysis the effect of free cash flow, risk and ownership structure to agency cost. (3) to analysis the effect of dividend payment to corporate value, and (4) to analysis the effect of and agency cost to corporate value The technique sampling is purposive sampling. Secondary data is used in this research. It is from financial report like balance sheet, financial statement and cash flow report. It is gotten from Indonesian Stock Exchange. The research period is 2000 up to 2006. It uses pooled data ( joint of time series data and cross section data) so the analysis units are 271 (n=271). To Analysis data is used descriptive analysis and also statistical analysis that’s name structural equation model (SEM). It uses structural equation model (SEM) because the model has a ladder causality relationship and several variable like ownership structure, agency cost, risk , dividend payment and corporate value are latent variables. The results show that (1) risk has a positive significant effect to the agency cost, It means that agency cost can reduce the risk especially high risk investment that manger can do. (2) Dividend payment has a positive significant effect to the corporate value, It supports the-birds-in-the-hand theory and (3) risk has a positive significant effect to the corporate value. It means that investor always care about risk of corporate where they will invest.

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The Relationship between Agency Cost and Capital Structure: A Study with the Restriction of Free Cash Flow

2010 International Conference on Management and Service Science ◽

10.1109/icmss.2010.5575969 ◽

2010 ◽

Author(s):

Junhong Chu

Keyword(s):

Capital Structure ◽

Cash Flow ◽

Agency Cost ◽

Free Cash Flow ◽

The Relationship

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The Impact of Ownership Structure as a Balancing Factor on the Relation between the Free Cash Flow and Optimal Use of the Assets

Kuwait Chapter of Arabian Journal of Business and Management Review ◽

10.12816/0018923 ◽

2014 ◽

Vol 4 (1) ◽

pp. 407-422

Author(s):

Daryush Javid ◽

Seyed Ali Malihi ◽

Elham Soheilian

Keyword(s):

Cash Flow ◽

Ownership Structure ◽

Free Cash Flow ◽

The Impact

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PENGARUH FREE CASH FLOW TERHADAP UTANG

Media Riset Akuntansi Auditing & Informasi ◽

10.25105/mraai.v4i2.1857 ◽

2017 ◽

Vol 4 (2) ◽

pp. 107

Author(s):

Heru Nurwahyudi ◽

Aida Ainul Mardiyah

Keyword(s):

Cash Flow ◽

Hypothesis Test ◽

Agency Cost ◽

Free Cash Flow ◽

Third Party ◽

Manufacturing Companies ◽

Font Size ◽

Public Companies ◽

Agency Relationship ◽

Debt Policy

The objective of this research is to analysis and giving the empirical evidence about the free cas flow and the effect of it for debt policy of public companies in Indonesia. This research was using 66 samples of manufacturing companies in the year 2000 and 90 sample of manufacturing in the year 2001. This sample was elected based on purposive sampling, the hypothesis test is the simple tinier regres-sion.The result of this research showed that hypothesis were suppo4ted, there are influence of free cash flow to the debt policy. In the agency relationship there is differences interest between the principal and the manager also created agency problems that finally also create agency cost. In the shareholders (agents) point of view, this can be minimize by the third party (debtho!der) whose come by the debt policy. Increasing financing with debt will reduce the conflict between the sharehold-ers and the management.Keywords: Free cash flow, debt

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An Interaction between Firm Strategy, Capital Structure and Firmâ€™s Performance

Journal of Economics and Behavioral Studies ◽

10.22610/jebs.v7i4(j).592 ◽

2015 ◽

Vol 7 (4(J)) ◽

pp. 37-47

Author(s):

Suresh Ramakrishnan ◽

Saqib Muneer . ◽

Melati Ahmad Anuar .

Keyword(s):

Firm Performance ◽

Capital Structure ◽

Cash Flow ◽

Significant Relationship ◽

Corporate Strategy ◽

Firm Strategy ◽

Free Cash Flow ◽

Sales Growth ◽

Return On Assets ◽

Return On Equity

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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Firm characteristics and capital structure adjustment

Investment Management and Financial Innovations ◽

10.21511/imfi.15(2).2018.12 ◽

2018 ◽

Vol 15 (2) ◽

pp. 129-144 ◽

Cited By ~ 1

Author(s):

Winston Pontoh ◽

Novi Swandari Budiarso

Keyword(s):

Capital Structure ◽

Cash Flow ◽

Market Timing ◽

Order Theory ◽

Free Cash Flow ◽

Internal Conflict ◽

Pecking Order ◽

Pecking Order Theory ◽

Trade Off ◽

Public Firms

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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FACTORS THAT DETERMINE DIVIDEND POLICY ON BANKING IN THE INDONESIA STOCK EXCHANGE

Business and Entrepreneurial Review ◽

10.25105/ber.v18i2.5332 ◽

2019 ◽

Vol 18 (2) ◽

pp. 145

Author(s):

Mega Febriani ◽

Farah Margaretha

Keyword(s):

Cash Flow ◽

Ownership Structure ◽

Stock Exchange ◽

Secondary Data ◽

Free Cash Flow ◽

Least Square ◽

Board Structure ◽

Growth Opportunity ◽

Managerial Implications ◽

Financial Characteristics

The problem of this research was to test and analyze empirically the influence to financial characteristics, ownership structure and board structure that have significant effects on dividend decisions. The objective of this research was banking firm that listed in Indonesian Stock Exchange for period 2010-2017. The methodology of this research was applies purposive sampling. The data obtained in this the secondary data was taken from Indonesian Stock Exchange. This research was panel least square model and processed using software eviews 9. Total number of samples is 27 companies. The purpose of this test is to prove the effect of the independent variables on the dependent variable.The result of this research shows that the financial characteristics, significant effected dividend decisions, meanwhile profitability, likuidity, free cash flow. Growth opportunity, age, size, leverage and asset tangibility does not effects the dividend decisions. Ownership structure significant effected dividend decisions, meanwhile institusional ownership and goverment ownership. And board structure significant effected dividend decisions, meanwhile independen director. The Managerial Implications from this research are how the company manages the capital sources from free cash flow and likuidity, how to make the company can be efficient in running the company and make earning.

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