Financial Flexibility, Costs of External Finance and Agency Costs of Free Cash Flow

2008 ◽  
Author(s):  
Michael Kisser
Keyword(s):  
Cash Flow ◽  
Agency Costs ◽  
Free Cash Flow ◽  
Financial Flexibility ◽  
External Finance

CEO Entrenchment and Corporate Hedging: Evidence from the Oil and Gas Industry

2013 ◽  
Vol 48 (3) ◽  
pp. 887-917 ◽  
Author(s):  
Praveen Kumar ◽  
Ramon Rabinovitch
Keyword(s):  
Cash Flow ◽  
Financial Distress ◽  
Agency Costs ◽  
Oil And Gas ◽  
Price Volatility ◽  
Chief Executive ◽  
Oil And Gas Industry ◽  
Free Cash Flow ◽  
Data Set ◽  
Corporate Hedging

AbstractUsing a unique data set with detailed information on the derivative positions of upstream oil and gas firms during 1996–2008, we find that hedging intensity is positively related to factors that amplify chief executive officer (CEO) entrenchment and free cash flow agency costs. There is also robust evidence that hedging is motivated by the reduction of financial distress and borrowing costs, and that it is influenced by both intrinsic cash flow risk and temporary spikes in commodity price volatility. We present a comprehensive perspective on the determinants of corporate hedging, and the results are consistent with the predictions of the risk management and agency costs literatures.

The Agency Costs of Free Cash Flow: Acquisition Activity and Equity Issues

1991 ◽  
Vol 64 (2) ◽  
pp. 213 ◽  
Author(s):  
Steven V. Mann ◽  
Neil W. Sicherman
Keyword(s):  
Cash Flow ◽  
Agency Costs ◽  
Free Cash Flow ◽  
Equity Issues

Agency Cost and Dividend Pay-out: A Study of Selected Listed Manufacturing Firms in Nigeria

2018 ◽  
Vol 1 (1) ◽  
pp. 42 ◽  
Author(s):  
Helen Obiageli Anazonwu ◽  
Francis Chinedu Egbunike ◽  
Felix Nwaolisa Echekoba
Keyword(s):  
Cash Flow ◽  
Agency Costs ◽  
Stock Exchange ◽  
Agency Cost ◽  
Manufacturing Firms ◽  
Free Cash Flow ◽  
Dividend Payments ◽  
Negative Effect ◽  
Cost Studies ◽  
Positive Effect

Agency cost is an internal cost which arises between management (agent) and shareholder (principal), because of the diverging interest of the two parties. Dividend payments are often employed to mitigate this cost. Studies have examined the effect of dividend pay-outs on agency costs documenting mixed findings. However, the literature on the reverse effect of agency costs on dividend pay-outs is still nascent. The main objective of the study is to examine the effect of agency cost on dividend pay-out of listed manufacturing firms in Nigeria. The study used a panel research design. The population of the study comprised listed manufacturing firms, but delimited to firms in conglomerate and consumer goods sectors of the Nigerian Stock Exchange. Data for the study were collected from yearly financial statements of the selected firms. The hypotheses were tested using pooled OLS Regression. The dependent variable of the study was dividend pay-out, while assets to sales ratio, leverage, and free cash flow were proxies of agency cost. Firm size and profitability measures (ROA and ROE) were used as control variables in the study. The study found a significant and positive effect of assets to sales ratio and free cash flow, and a significant and negative effect of leverage on dividend pay-out. The study recommended amongst others that, managers should consider the implication of agency costs in the design of in the design and implementation of a dividend policy.

scholarly journals INVESTMENT DETERMINANTS OF FITNESS SMES IN PORTUGAL

2014 ◽  
Vol 19 (Supplement_1) ◽  
pp. S496-S523
Author(s):  
Paulo Maçãs Nunes ◽  
Zélia Serrasqueiro ◽  
Pedro Guedes de Carvalho
Keyword(s):  
Financial Crisis ◽  
Cash Flow ◽  
Negative Influence ◽  
Free Cash Flow ◽  
Firm Investment ◽  
Neoclassical Theory ◽  
Government Subsidies ◽  
External Finance ◽  
Investment Determinants ◽  
Financial Crisis Of 2008

Based on a sample of 182 Portuguese fitness SMEs we study the investment determinants of fitness SMEs in Portugal. The multiple empirical evidence obtained in this study lets us conclude that the main explanatory theories of firm investment cannot be considered mutually exclusive in explaining the investment of Portuguese fitness SMEs, since: 1) they adjust investment as a function of sales, corroborating the assumptions of Neoclassical theory; 2) cash flow is an important financial resource for investment, corroborating the assumptions of Free Cash Flow theory; and 3) external finance, namely debt, is a restrictive determinant of investment, which corroborates the assumptions of Agency theory. Besides these results, we find that growth opportunities and government subsidies are positive determinants of investment in Portuguese fitness SMEs, and the financial crisis of 2008 has a negative influence on investment in Portuguese fitness SMEs. The financial crisis of 2008 also means greater relative importance of cash flow and government subsidies for increased investment, and debt for diminished investment, in fitness SMEs.

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