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The Study On The Discretionary Revenue Expenditure And Free Cash Flow In Stated-Owned Businesses

Posted on:2014-08-15Degree:MasterType:Thesis
Country:ChinaCandidate:J LiFull Text:PDF
GTID:2269330425459326Subject:Accounting
Abstract/Summary:PDF Full Text Request
More and more scholars have been involved in studying free cash flow, after Jensen proposed free cash flow hypothesis. Past literatures have already showed that one of the manifestations about the discretionary expenditure is the discretionary revenue expenditure. The agency cost of free cash flow has always been the focus of the studies. The discretionary expenditure of the listed companies is common in the capital market. Owing to the unique relations between ownership and management of enterprises, whether the agency cost problem also exists in the state-owned business becomes hot topic of current researches. Meanwhile establishing a set of effective mechanism that could control the agency costs of the free cash flow and improve performance of enterprises is also of academic importance.The paper researches the correlation between the discretionary revenue expenditure and free cash flow using both of theoretical and empirical methods. Dividends policy could reduce the cash flow and discretionary revenue expenditure in the state-owned business. In this sense level, this paper reduces the agency cost of the free cash flow with the empirical study. It defines the concepts of discretionary revenue expenditure and the free cash flow and analyzes the basic theories, such as property right theory, information asymmetry and the agency cost theory. The paper selects listed companies in Shanghai and Shenzhen stock market from2009to2011and researches the agency cost problem of the state-owned businesses. It analyzes the agency cost using the methods of the descriptive statistics and regression analysis. The results show that both the listed companies and state-owned businesses have serious agency cost problems and the discretionary revenue expenditure has the statistically significant positive correlation with the free cash flow. The paper also finds that the dividend policies reduce the agency cost in the state-owned businesses.In the end of the article, it provides policy recommendations to reduce the agency cost of free cash flow. The large shareholder in the state-owned businesses achieved the dividends during the reforming period. So the state-owned businesses should distribute the dividends initiatively to reduce the cash holdings. This can reduce the agency cost.
Keywords/Search Tags:discretionary revenue expenditure, free cash flow, agency cost, SOE dividend
PDF Full Text Request
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