Cash Acquirers: Can Free Cash Flow, Debt and Institutional Ownership Explain Long Run Performance?

Gregory, Alan; Wang, Yuan-Hsin

doi:10.2139/ssrn.1793094

Cited by 7 publications

(8 citation statements)

References 79 publications

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“…Research conducted by Udin, et al (2017) in Pakistan, found no significant relationship between institutional ownership on corporate financial performance. Similar results were also found in studies using other countries as samples, for example in the United Kingdom (Gregory and Wang, 2013) and Jordan (Al-Najjar, 2015). The result is due to macro conditions in the country.…”

Section: Institutional Ownership and Risks Of Financial Distresssupporting

confidence: 87%

The Impact of Ownership Structure on the Indicator of Financial Distress In Indonesian Companies

Annither¹,

Johann²,

Hidayat³

et al. 2020

JAB

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The increase in bankruptcy cases and delaying debt repayment by 16.43 percent during the year of 2015 to 2017 reinforced the importance of having good corporate governance to avoid this issue. This study aims to delve into the effect of ownership structures on the risk of financial distress in 421 companies (except financial institutions) in the period from 2012 to 2017. The types of ownership that are being examined are Institutional Ownership, Insider Ownership, Government Ownership, and Foreign Ownership. This study uses OLS Driscoll-Kraay standard error panel data regression. The results of this study shows that Institutional Ownership has a positive relationship to financial distress which is caused by the tendency of Institutional investors to conduct passive monitoring. Inversely, foreign ownership and government ownership have been proven to have a negative relationship with the risk of financial distress. This was caused by the capability of the foreign investors to do better-monitoring activities and maintain the ultimate shareholder's company in their home country. Furthermore, the presence of merah putih shares allows the government to have absolute voting power. This research intends to provide new business perspectives to companies, investors, regulators, creditors, and other stakeholders for economic decision-making purposes.

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Section: Institutional Ownership and Risks Of Financial Distresssupporting

confidence: 87%

The Impact of Ownership Structure on the Indicator of Financial Distress In Indonesian Companies

Annither¹,

Johann²,

Hidayat³

et al. 2020

JAB

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“…They showed that companies having higher quality, would pay dividends to eliminate the problems associated with free cash flow, while other companies having lower quality could pay dividends to earn money in the future and to reduce the problems associated with free cash flow. Gregory and Wang (2013) studied the relationship between free cash flow, corporate ownership and debt on the long-term performance. They showed that low ratio of debt to net assets and high FCF could have benefits for monitoring and controlling shareholders.…”

Section: Introductionmentioning

confidence: 99%

A study on relationship among free cash flow, firm value and investors’ cautiousness: Evidence from Tehran Stock Exchange

Ghodrati¹,

Hashemi²

2014

10.5267/j.msl

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Financial statements as well as financial standards are always considered as primary sources for getting rich information of firms. The standards are normally divided in two categories of economic and accounting and each of these standards shows one of the specifications of the company and has its own advantageous and disadvantageous. There are different standards, which are used for firm assessment. Therefore, a company with more gained prominences has more change to succeed in attracting credits and financing from the capital market. Under such circumstances, such a company can attract more finance and it can be sold sooner on the stock exchange. This paper tries to investigate on the free cash flow as an effective factor in specifying the real value of the business enterprises on 56 selected firms from Tehran Stock Exchange. The results of this study have disclosed that, there was a direct and meaningful relationship between free cash flow of the business enterprises and their real values. Second, the real values of the business enterprises are more than their predicted values. Finally, the predicted value of the business enterprises on the basis of the free cash flow is more than their market value.

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“…No significant influence of institutional ownership on the possibility of firms' financial distress is found by Udin et al (2017), Gregory andWang (2013), andAl-Najjar (2015), etc.…”

Section: Institutional Ownership and Financial Distressmentioning

confidence: 85%

Ownership Structure and Financial Distress: Investigating the Moderating Effect of Audit Quality

Sarker,

Hossain

2023

IJEFI

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The study examines the effect of ownership structure and the moderating role of audit quality on the likelihood of firms’ financial distress. 144 DSE-listed manufacturing companies were chosen to design the sampling frame for performing the research. Ten manufacturing industry categories were selected, and data from 1310 firm-year observations were collected during the research period 2012-2021 from several sources, including annual reports of the companies, the World Bank Database etc. Using the Two-stage-least-square (2SLS) model estimation technique, the study disclosed that managerial ownership, foreign ownership, ownership concentration, and government ownership have a significant negative influence on the likelihood of firms’ financial distress, whereas institutional ownership and public ownership are positively correlated with the financial distress. It is also evidenced that firms’ shareholders’ influence and GDP growth rate have a noteworthy negative influence on distress possibilities. In contrast, firm size is positively correlated with the financial distress of the firms. No significant effect of firm age and inflation rate on financial distress was identified. The study period covered only 12 years, from 2012-2021, and focused on the manufacturing industries of Bangladesh. The study offers robust evidence on the role of ownership structure on the stability of manufacturing companies using a multidimensional approach of ownership structure and moderating effect of audit quality, which has financial, legal, and social implications in the context of emerging economies like Bangladesh.

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Cash Acquirers: Can Free Cash Flow, Debt and Institutional Ownership Explain Long Run Performance?

Cited by 7 publications

References 79 publications

The Impact of Ownership Structure on the Indicator of Financial Distress In Indonesian Companies

The Impact of Ownership Structure on the Indicator of Financial Distress In Indonesian Companies

A study on relationship among free cash flow, firm value and investors’ cautiousness: Evidence from Tehran Stock Exchange

Ownership Structure and Financial Distress: Investigating the Moderating Effect of Audit Quality

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