A study on agency costs: The relationship of the free cash flow hypothesis to sales growth and firm performance
Date of Publication
2013
Document Type
Bachelor's Thesis
Degree Name
Bachelor of Science in Accountancy
Subject Categories
Accounting
College
Ramon V. Del Rosario College of Business
Department/Unit
Accountancy
Thesis Adviser
Joy Lynn Legaspi
Defense Panel Chair
Herminigilda E. Salendrez
Defense Panel Member
Merlinda Bucad
Cynthia Cudia
Joy Lynn Legaspi
Abstract/Summary
The paper tests the agency argument if free cash flow contributes to higher sales growth. It also tests if firm performance is negatively affected by free cash flow. And it finally test if governance controls help mitigate such effects to the performance in relation to its sales growth. The related literature illustrates the brief history of agency theory and that free cash flow is one of the quantifiable amounts available for agency cost. Deriving samples from manufacturing firms in Europe, the data was analyzed using a panel data regression under the random effects model. Contrary to agency theory, free cash flow does not increase sales growth. Performance however is consistent with the theory and has a negative correlation with free cash flow. Results for governance controls yielded only one significant result ou of possible three for performance and none for sales growth. Owner-controlled firms provide a negative effect on performance for firms with free cash flow.
Abstract Format
html
Language
English
Format
Accession Number
TU18223
Shelf Location
Archives, The Learning Commons, 12F, Henry Sy Sr. Hall
Physical Description
201, 1 unnumbered leaves ; 28 cm.
Keywords
Cash flow--Philippines; Stock ownership
Recommended Citation
Cancino, I. J., Merin, J. G., Villareal, J. J., & Yapendon, J. T. (2013). A study on agency costs: The relationship of the free cash flow hypothesis to sales growth and firm performance. Retrieved from https://animorepository.dlsu.edu.ph/etd_bachelors/11567