Are Debt and Incentive Compensation Substitutes in Controlling the Free Cash Flow Agency Problem?

2006 ◽  
Author(s):  
Yilei Zhang
Keyword(s):  
Cash Flow ◽  
Agency Problem ◽  
Free Cash Flow ◽  
Incentive Compensation

scholarly journals MASALAH KEAGENAN ALIRAN KAS BEBAS, MANAJEMEN LABA DAN RELEVANSI NILAI INFORMASI AKUNTANSI

2018 ◽  
Vol 15 (2) ◽  
pp. 232-246
Author(s):  
Aulia Fuad Rahman
Keyword(s):  
Earnings Management ◽  
Cash Flow ◽  
Stock Price ◽  
Value Relevance ◽  
Agency Problem ◽  
Free Cash Flow ◽  
Potential Conflict ◽  
Book Value ◽  
Negative Effect ◽  
The Impact

Free cash flow agency problem causes potential conflict of interest between managers and shareholders. Managers of firms with high free cash flow and of low growth opportunity tend to invest in marginal or even negative NPV project and use earnings management to camouflage the effects of non-wealth-maximizing investments. As a result, it is predicted that investors will react to earnings management and free cash flow agency problem and therefore reflected in stock price. In this sense, earnings management and free cash flow agency problem is predicted to have an impact on value relevance of accounting information.The objective of this study is to assess the impact of earnings management on value relevance of earnings and book value. This study also investigates the different effect of earnings management on value relevance of earnings and book value between free cash flow agency problem firms and non free cash flow agency problem firms. Result shows that earnings and book value are value relevance and earnings management decreases those value relevances. The result also conclude that the negative effect of earnings management on value relevance of earnings and book value is higher for free cash flow agency problem firms compared to non free cash flow agency problem firms.

scholarly journals MASALAH KEAGENAN ALIRAN KAS BEBAS, MANAJEMEN LABA DAN RELEVANSI NILAI INFORMASI AKUNTANSI

2017 ◽  
Vol 15 (2) ◽  
pp. 232
Author(s):  
Aulia Fuad Rahman
Keyword(s):  
Earnings Management ◽  
Cash Flow ◽  
Stock Price ◽  
Value Relevance ◽  
Agency Problem ◽  
Free Cash Flow ◽  
Potential Conflict ◽  
Book Value ◽  
Negative Effect ◽  
The Impact

Free cash flow agency problem causes potential conflict of interest between managers and shareholders. Managers of firms with high free cash flow and of low growth opportunity tend to invest in marginal or even negative NPV project and use earnings management to camouflage the effects of non-wealth-maximizing investments. As a result, it is predicted that investors will react to earnings management and free cash flow agency problem and therefore reflected in stock price. In this sense, earnings management and free cash flow agency problem is predicted to have an impact on value relevance of accounting information.The objective of this study is to assess the impact of earnings management on value relevance of earnings and book value. This study also investigates the different effect of earnings management on value relevance of earnings and book value between free cash flow agency problem firms and non free cash flow agency problem firms. Result shows that earnings and book value are value relevance and earnings management decreases those value relevances. The result also conclude that the negative effect of earnings management on value relevance of earnings and book value is higher for free cash flow agency problem firms compared to non free cash flow agency problem firms.

scholarly journals Agency cost of type I and accounting numbers in Australia and India

2016 ◽  
Vol 13 (4) ◽  
pp. 307-316 ◽  
Author(s):  
Lious Ntoung Agbor Tabot ◽  
Outman Ben Chettah ◽  
Eva Masárova
Keyword(s):  
Cash Flow ◽  
Manufacturing Industry ◽  
Value Relevance ◽  
Agency Problem ◽  
Agency Cost ◽  
Free Cash Flow ◽  
Service Industries ◽  
Type I ◽  
Book Value ◽  
Accounting Numbers

This paper has as objective to assess the agency cost of type I on the value relevance of accounting numbers (earnings and book value) for all listed firms in the manufacturing, retailing and service industries in Australia and India from 2005 to 2012 using the modified version of the Ohlson’ model in Faud and Mohd, (2008) where price is express as a linear function of earnings, book value and various accounting numbers. As predicted, the results show that both earnings and book value are value relevance for the manufacturing, retailing and servicing industry in Australia and India. The presence of the free cash flow agency problem caused the value relevance of earnings and book value to decline in Australia and India. However, the effect is not stable across the difference industries. The results show that in the manufacturing industry, the effect caused by the free cash flow agency problem is relatively higher for Australia and India than in the retail and service industries. As a result, the firms in the manufacturing with free cash flow agency problem have lower earnings (book value) coefficients than those without free cash flow agency problem

scholarly journals The Influence of Firms with Excess Free Cash Flow and Low Growth Perspective Towards Earning Management

2016 ◽  
Vol 3 (3) ◽  
pp. 380-397
Author(s):  
Marika Suma Raya Sembiring ◽  
Kathleen Kusuma Nugroho
Keyword(s):  
Earnings Management ◽  
Cash Flow ◽  
Significant Relationship ◽  
Audit Quality ◽  
Agency Problem ◽  
Free Cash Flow ◽  
Manufacturing Companies ◽  
Control Variables ◽  
Dividend Payment ◽  
The Relationship

This research aims to investigate whether firms with excess of free cash flow and low growth perspective are tend to engage in earnings management with several control variables included. We predict the relationship between each variable using multiple regressions model.  The data sample used is manufacturing companies listed in IDX from the year of 2012 to 201. The result of this research presents that there is no significant relationship between excess of free cash flow and earnings management. The reasons behind this result might be a difference in type of agency problem, in dividend policy, and in organization behavior widespread across the countries. However, we found a significant relationship between control variables to the dependent variable by means of discretionary accruals, which are firm size, IFRS implementation and audit quality towards earnings management. Keywords: Agency Problem, Earnings management, Excess Free Cash Flow, Dividend Payment.

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