scholarly journals Testing the validity of free cash flow hypothesis: Evidence from Nigeria

2020 ◽  
Vol 1 (3) ◽  
Keyword(s):  
Cash Flow ◽  
Free Cash Flow ◽  
Free Cash Flow Hypothesis

An Examination of the Free Cash Flow and Information/Signaling Hypotheses Using Unexpected Dividend Changes Inferred from Option and Stock Prices: The Case of Regular Dividend Increases

2011 ◽  
Vol 14 (03) ◽  
pp. 563-600 ◽  
Author(s):  
Sheng-Syan Chen ◽  
Kuei-Chin Fu
Keyword(s):  
Research And Development ◽  
Cash Flow ◽  
Stock Prices ◽  
Abnormal Returns ◽  
Positive Association ◽  
Free Cash Flow ◽  
High Q ◽  
Information Signaling ◽  
Dividend Increases ◽  
Free Cash Flow Hypothesis

This paper measures unexpected dividend changes in testing the free cash flow and information/signaling hypotheses using the Bar–Yosef/Sarig method. The empirical findings reveal the following: (i) The association between announcement period abnormal returns and the cash level is significantly positive for low q firms; (ii) The positive association between announcement period, abnormal returns, and the cash level is stronger in low q than in high q firms for most regressions; (iii) Low q firms reduce their capital and research and development (R&D) expenditures during the four fiscal years following dividend increase announcements. Our results are consistent with the free cash flow hypothesis.

A test of the free cash flow hypothesis

1991 ◽  
Vol 29 (2) ◽  
pp. 315-335 ◽  
Author(s):  
Larry H.P. Lang ◽  
RenéM. Stulz ◽  
Ralph A. Walkling
Keyword(s):  
Cash Flow ◽  
Free Cash Flow ◽  
Free Cash Flow Hypothesis

Economic Sources of Gain in Stock Repurchases

2004 ◽  
Vol 39 (3) ◽  
pp. 461-479 ◽  
Author(s):  
Konan Chan ◽  
David Ikenberry ◽  
Inmoo Lee
Keyword(s):  
Cash Flow ◽  
Market Reaction ◽  
Free Cash Flow ◽  
Stock Repurchases ◽  
Initial Reaction ◽  
Cross Sectional ◽  
Economic Role ◽  
Related Information ◽  
Long Run ◽  
Free Cash Flow Hypothesis

AbstractPrevious studies offer a mixed understanding of the economic role of stock repurchases. This paper investigates three key economic motivations—mispricing, disgorging free cash flow, and increasing leverage—by evaluating cross-sectional differences in both the initial market reaction and long-run performance. The initial reaction provides some support for the mispricing story. However, subsequent earnings-related information shocks suggest that the initial market reaction is incomplete and that long-run performance may be informative. The long-horizon return evidence is most consistent with the mispricing hypothesis and, to some degree, the free cash flow hypothesis. We find little support for the leverage hypothesis.

scholarly journals Agency problems and audit fees: further tests of the free cash flow hypothesis

2009 ◽  
Vol 50 (2) ◽  
pp. 321-350 ◽  
Author(s):  
Paul A. Griffin ◽  
David H. Lont ◽  
Yuan Sun
Keyword(s):  
Cash Flow ◽  
Agency Problems ◽  
Audit Fees ◽  
Free Cash Flow ◽  
Free Cash Flow Hypothesis

scholarly journals Determinants of The Medium Of Payment In Corporate Acquisitions

2011 ◽  
Vol 11 (1) ◽  
pp. 15 ◽  
Author(s):  
Gregory M. Noronha ◽  
Nilanjan Sen ◽  
David M. Smith
Keyword(s):  
Logistic Regression ◽  
Regression Analysis ◽  
Cash Flow ◽  
Logistic Regression Analysis ◽  
Free Cash Flow ◽  
Corporate Acquisitions ◽  
Information Models ◽  
Corporate Takeover ◽  
Tax Status ◽  
Free Cash Flow Hypothesis

This study identifies factors that may be correlated with the bidders choice between offering cash versus stock in a corporate takeover. Results of a logistic regression analysis are generally consistent with information models involving the choice of payment type, as well as hypotheses related to the targets tax status. Support for Jensens (1986) free cash flow hypothesis also is found.

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