This paper examines the extent of firm level over-investment of free cash flow. Using an accounting-based framework to measure overinvestment and free cash flow, I find evidence that, consistent with agency cost explanations, over-investment is concentrated in firms with the highest levels of free cash flow. Further tests examine whether firms’ governance structures are associated with over-inv...

The purpose of this study was to examine the expected returns of Carhart model compared to the capital asset pricing model and the implicit capital cost model based on cash and capital returns of growth and value stocks. The statistical population consisted of the companies listed in Tehran Stock Exchange and the time domain is between 2007 and 2016. By choosing Cochran sampling, 126 companies ...

this paper investigates the relationship between earnings management and quality of earnings for the bankrupt and non-bankrupt firms listed in the tehran stock exchange from 2007 to 2012.the earnings quality  is measured by four separate accounting-based earnings attributes: accruals quality, earnings persistence, earnings predictability; earnings and is also examined by testing the relationshi...

We investigate the investment-cash flow sensitivity of a large sample of the UK listed firms and confirm that investment is strongly cash flow-sensitive. Is this sensitivity a result of agency problems when managers with high discretion overinvest, or of asymmetric information when managers owning equity are underinvesting if the market (erroneously) demands too high a risk premium? We find tha...

We investigate the investment-cash flow sensitivity of a large sample of the UK listed firms and confirm that investment is strongly cash flow-sensitive. Is this suboptimal investment policy the result of agency problems when managers with high discretion overinvest, or of asymmetric information when managers owning equity are underinvesting if the market (erroneously) demands too high a risk p...

The accruals anomaly, demonstrated by Sloan (1996), generated significant excess returns consistently for over four decades until 2002. Since then, the accruals anomaly has apparently disappeared. In this paper, I argue that one factor responsible for this decline is the increasing incidence of analysts’ cash flow forecasts which has provided markets with information about likely future accrual...

Q, Cash Flow and Investment: An Econometric Critique The effects of measurement and speci…cation error on estimates of the Q and cash ‡ow model of investment are investigated. Two sources of error are considered: expensing of R&D expenditures and failing to identify that component of cash ‡ow which relaxes …nancing constraints. We apply random-effects and instrumental variables estimators to a ...

Is investment cash-flow sensitivity affected by a country’s capital market imperfection? We take 42 countries as our sample and collect six imperfect capital market measures (ICAM), ie., the stock market capitalization ratio, number of publicly-listed firm, stock turnover ratio, bank loan ratio, long-term debt ratio and the interest spread. Using a two-step approach, negative relationships betw...