Interactions between Free Cash Flow, Debt Policy and Structure of Governance: 3SLS Simultaneous Model
This research tests the efficiency of the ownership structure and the debt policy as mechanism of resolution of agency conflicts between shareholders and managers du to the problem of overinvestment, in the limitation of the problem of the free cash flow. by estimating three stage least square simultaneous model and on the basis of a sample of 35 non financial Tunisian listed companies selected for the period 1999–2008, our results are in favor of the theory of free cash flows of Jensen (1986) that stipulates that the debt policy represents the principal governance mechanism that can limit the risk of free cash flow. However, the ownership concentration and managerial ownership increase the risk of the free cash flow.
This work is licensed under a Creative Commons Attribution 3.0 License.
To make sure that you can receive messages from us, please add the 'macrothink.org' domain to your e-mail 'safe list'. If you do not receive e-mail in your 'inbox', check your 'bulk mail' or 'junk mail' folders.
Copyright © Macrothink Institute ISSN 1941-899X
'Macrothink Institute' is a trademark of Macrothink Institute, Inc.