The Free Cash Flow Hypothesis for Sales Growth and Firm Performance  

Oleh:

Brush, Thomas H. ; Bromiley, Philip ; Hendrickx, Margaretha

Jenis: Article from Journal - ilmiah internasional
Dalam koleksi: Strategic Management Journal vol. 21 no. 4 (2000), page 455-472.
Topik: FIRM; sales growth; agency; free cash flow; governance

Ketersediaan

Perpustakaan Pusat (Semanggi) Nomor Panggil: SS30.5 Non-tandon: 1 (dapat dipinjam: 0) Tandon: tidak ada

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Isi artikel

(Business is business ! And business must grow --> Dr. Seuss, The Lorax) The paper investigates the agency argument that sales growth in firms with free cash flow (and without strong governance) is less profitable than sales growth for firms without free cash flow. It also tests whether strong governance conditions improve the performance of firms with free cash flow and / or limit the investments in unprofitable sales growth. Consitent with agency theory, firms with free cash flow gain less from sales growth than firms without free cash flow. But different governance conditions affect sales growth and performance in different ways. Having substantial management stock ownership mitigates the influence of free cash flow on performance, despite allowing higher sales growth. In contrast, outside blocks held by mutual funds reduce sales growth substantially, but does not increase performance from sales growth.

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