THE FREE CASH-FLOW THEORY VERSUS FINANCIAL CONSTRAINTS, INVESTMENTS, CORPORATE GOVERNANCE AND SOFT BUDGETING PROBLEMS
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The supposed preference of firms for internal financial sources to fund their investments can be explained by either the free cash-flow or the financial constraints theories, both relying on asymmetric information. Neither theory was found fully valid by recent research. Using a French data panel, conclusive evidence will be made in favour of the free cash-flow theory in special cases. The validity of the free cash-flow theory in special cases will bring new issues to light with the introduction of a new definition: soft budgeting problem of capital. Through this analysis, the possible interaction between capital market imperfections and general equilibrium will also gain new dimension.
2017 ◽
Vol 14
(3)
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pp. 210-217
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2019 ◽
Vol 2
(2)
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pp. 363-371
1992 ◽
Vol 47
(5)
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pp. 1963-1975
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1994 ◽
Vol 15
(2)
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pp. 139-148
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2017 ◽
Vol 34
(2)
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pp. 284-308
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2019 ◽
Vol 60
(1)
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pp. 77-91
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