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Thispaperexaminesfirminvestingdecisionsinthepresenceoffreecashflow.Intheory,firmlevelinvestmentshouldnotberelatedtointernallygeneratedcashflows(Modigliani&Miller,1958).However,priorresearchhasdocumentedapositiverelationbetweeninvestmentexpenditureandcashflow(e.g.,Hubbard,1998).Therearetwointerpretationsforthispositiverelation.First,thepositiverelationisamanifestationofanagencyproblem,wheremanagersinfirmswithfreecashflowengageinwastefulexpenditure(e.g.,Jensen1986;Stulz1990).Whenmanagers’objectivesdifferfromthoseofshareholders,thepresenceofinternallygeneratedcashflowinexcessofthatrequiredtomaintainexistingassetsinplaceandfinancenewpositiveNPVprojectscreatesthepotentialforthosefundstobesquandered.Second,thepositiverelationreflectscapitalmarketimperfections,wherecostlyexternalfinancingcreatesthepotentialforinternallygeneratedcashflowstoexpandthefeasibleinvestmentopportunityset(e.g.,Fazzari,Hubbard,&Petersen,1988;Hubbard,1998).Thispaperfocusesonutilizingaccountinginformationtobettermeasuretheconstructsoffreecashflowandover-investment,therebyallowingamorepowerfultestoftheagency-basedexplanationforwhyfirmlevelinvestmentisrelatedtointernallygeneratedcashflows.Indoingso,thispaperisthefirsttoofferlargesampleevidenceofover-investmentoffreecashflow.Priorresearch,suchasBlanchard,Lopez-di-Silanes,andVishny(1994),documentexcessiveinvestmentandacquisitionactivityforelevenfirmsthatexperiencealargecashwindfallduetoalegalsettlement,Harford(1999)findsusingasampleof487takeoverbids,thatcash-richfirmsaremorelikelytomakeacquisitionsthatsubsequentlyexperienceabnormaldeclinesinoperatingperformance,andBates(2005)findsforasampleof400subsidiarysalesfrom1990to1998thatfirmswhoretaincashtendtoinvestmore,relativetoindustrypeers.Thispaperextendsthesesmallsamplefindingsbyshowingthatover-investmentoffreecashflowisasystematicphenomenonacrossalltypesofinvestmentexpenditure.Theempiricalanalysisproceedsintwostages.First,thepaperusesanaccounting-basedframeworktomeasurebothfreecashflowandover-investment.Freecashflowisdefinedascashflowbeyondwhatisnecessarytomaintainassetsinplaceandtofinanceexpectednewinvestments.Over-investmentisdefinedasinvestmentexpenditurebeyondthatrequiredtomaintainassetsinplaceandtofinanceexpectednewinvestmentsinpositiveNPVprojects.Tomeasureover-investment,Idecomposetotalinvestmentexpenditureintotwocomponents:(i)requiredinvestmentexpendituretomaintainassetsinplace,and(ii)newinvestmentexpenditure.Ithendecomposenewinvestmentexpenditureintoover-investmentinnegativeNPVprojectsandexpectedinvestmentexpenditure,wherethelattervarieswiththefirm’sgrowthopportunities,financingconstraints,industryaffiliationandotherfactors.Undertheagencycostexplanation,managementhasthepotentialtosquanderfreecashflowonlywhenfreecashflowispositive.Attheotherendofthespectrum,firmswithnegativefreecashflowcanonlysquandercashiftheyareabletoraise‘‘cheap’’capital.Thisislesslikelytooccurbecausethesefirmsneedtobeabletoraisefinancingandtherebyplacethemselvesunderthescrutinyofexternalmarkets(DeAngelo,DeAngelo,&Stulz,2004;Jensen,1986).Consistentwiththeagencycostexplanation,Ifindapositiveassociationbetweenover-investmentandfreecashflowforfirmswithpositivefreecashflow.1Forasampleof58,053firm-yearsduringtheperiod1988–2002,Ifindthatforfirmswithpositivefreecashflowtheaveragefirmover-invests20%ofitsfreecashflow.Furthermore,Idocumentthatthemajorityoffreecashflowisretainedintheformoffinancialassets.Theaveragefirminmysampleretains41%ofitsfreecashflowaseithercashormarketablesecurities.Thereislittleevidencethatfreecashflowisdistributedtoexternaldebtholdersorshareholders.Findinganassociationbetweenover-investmentandfreecashflowisconsistentwithrecentresearchdocumentingpoorfutureperformancefollowingfirmlevelinvestmentactivity.Forexample,Titman,Wei,andXie(2004)andFairfield,Whisenant,andYohn(2003)showthatfirmswithextensivecapitalinvestmentactivityandgrowthinnetoperatingassetsrespectively,experienceinferiorfuturestockreturns.Furthermore,Dechow,Richardson,andSloan(2005)findthatcashflowsretainedwithinthefirm(eithercapitalizedthroughaccrualsor‘‘invested’’infinancialassets)areassociatedwithlowerfutureoperatingperformanceandfuturestockreturns.Thisperformancerelationisconsistentwiththeover-investmentoffreecashflowsdocumentedinthispaper.Thesecondsetofempiricalanalysesexaminewhethergovernancestructuresareeffectiveinmitigatingover-investment.Priorresearchhasexaminedtheimpactofavarietyofgovernancestructuresonfirmvaluationandthequalityofmanagerialdecisionmaking(seeBrown&Caylor,2004;Gompers,Ishii,&Metrick,2003;Larcker,Richardson,&Tuna,2005fordetailedsummaries).Collectively,theabilityofcross-sectionalvariationingovernancestructurestoexplainfirmvalueand/orfirmdecisionmakingisrelativelyweak.Consistentwiththis,Ifindevidencethatoutofalargesetofgovernancemeasuresonlyafewarerelatedtoover-investment.Forexample,firmswithactivistshareholdersandcertainanti-takeoverprovisionsarelesslikelytoover-investtheirfreecashflow.Thenextsectiondevelopstestablehypothesesconcerningtherelationbetweenfreecashflowandover-inve
本文标题:外文文献及翻译瑞查德森-自由现金流与过度投资
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