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1. Notice of Retraction: Free Cash Flow and Overinvestment - An Empirical Evidence from China Securities Market

Author

Jian Jianhui, He Pinglin, and Yu Zhongfu

Subjects
Finance, Shareholder, Free cash flow, business.industry, Opportunism, Agency cost, Principal–agent problem, Economics, Cash flow, Monetary economics, Investment (macroeconomics), Empirical evidence, business
Abstract

Because of principal-agent relationship between managers and shareholders, managers' opportunism often leads to overinvestment in the presence of free cashflow. This paper proves that there is a significantly positive correlation between overinvestment and free cashflow in China's listed companies from the year 2003 to 2005 by empirical method, which is consistent with agency cost explanations. The empirical analysis uses an accounting based framework to measure the free cashflow and overinvestment.

Published
2009

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