An Empirical Study On The Impact Of Free Cash Flow On Excess Perks

Free cash flow is the blood of enterprise production and operation activities.It not only relates to the enterprise production and management decision-making,but also affect the sustainable development of the enterprise in the future.Under the modern corporation system,the problem of agency is very common.Plenty of free cash flow for can offer the management an opportunity to dominate cash,which results in more consumption and increasng such agency costs,consumption which is regarded as a recessive salary management,is one of the enterprise agency cost"parasites".,The spending part which is more than normal business part has the agent cost motivation,known as "excess perks".In this paper,based on the agency cost theory,through the definition and measurement excess perks,we analyze the agency cost of free cash flow problem of different conditions,and inspect the influence of enterprise free cash flow to excess perks.Taking all listed companies as samples,we investigate the state and relationship of excess perks and free cash flow during 2010-2014.First,we make Pearson correlation and found a high degree of correlation between the free cash flow and excess perks.On this basis,by controling other variables to conduct statistical tests,it is found that there is a significant positive correlation between the free cash flow and excess perks in the 1%level.As a whole,the more free cash flow of the enterprise,the higher the excess perks of the manager,and the more prominent the agency costs.Further,we study the relationship between the two groups from the perspective of financing constraints and property rights by grouping enterprises.Results show that compared with the financing constraint enterprises,the impact of free cash flow on excess perks is more significant;and compared with the state-owned enterprises,non-state-owned enterprises is also more significant.These results indicate that free cash flow is an important control variable in agency cost control,and there are no financing constraints of enterprises relative to the existence and state-owned enterprises relative to private enterprises,all should adopt appropriate financial means to control free cash flow of enterprises,so as not to produce critical excess perks problem.