Over-investment and Free Cash Flow: Evidence from Thailand
by Nopphon Tangjitprom
Title: | Over-investment and Free Cash Flow: Evidence from Thailand |
Author(s): | Nopphon Tangjitprom |
Issued date: | 2015-04 |
Citation: | International Conference on Business, Economics and Management (ICBEM'15) April 9-10, 2015 Phuket (Thailand), 14-17 |
Abstract: |
This paper examines whether there is a relation between over-investment and free cash flow. In perfect capital market, it is expected that investment decision should not be influenced by the level of cash flow. However, the free cash flow hypothesis predicts that firms with higher free cash flow will be vulnerable to the agency problem like over-investment. Using the data from listed firms in the Stock Exchange of Thailand during 2001-2013, the result indicates that there is a positive relation between over-investment and free cash flow. Therefore, this evidence supports the free cash flow hypothesis and it implies that corporate governance mechanism is required to mitigate the agency cost of free cash flow. |
Keyword(s): | Over-investment
Free cash flow hypothesis Agency theory Stock Exchange of Thailand |
Resource type: | Conference Paper |
Extent: | 4 pages |
Type: | Text |
File type: | application/pdf |
Language: | eng |
Rights holder(s): | Nopphon Tangjitprom |
URI: | http://repository.au.edu/handle/6623004553/21114 |
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