Over-investment of free cash flow

• 成果类型: Article; Proceedings Paper
• 署名作者: Richardson, Scott
• 署名单位: University of Pennsylvania
• 刊物名称: REVIEW OF ACCOUNTING STUDIES
• ISSN/ISSBN: 1380-6653
• DOI: 10.1007/s11142-006-9012-1
• 发表日期: 2006
• 页码: 159-189
• 关键词: corporate; MARKET; determinants; INFORMATION; SENSITIVITIES; constraints; liquidity; earnings; COSTS; FIRMS

摘要

This paper examines the extent of firm level over-investment of free cash flow. Using an accounting-based framework to measure over-investment and free cash flow, I find evidence that, consistent with agency cost explanations, over-investment is concentrated in firms with the highest levels of free cash flow. Further tests examine whether firms' governance structures are associated with over-investment of free cash flow. The evidence suggests that certain governance structures, such as the presence of activist shareholders, appear to mitigate over-investment.