Earnings management, surplus free cash flow, and external monitoring

The Impacts of Free Cash Flows and Agency Costs on Firm Performance

“…According to literature, there were seven proxy variables suggested to measure agency costs: They are total asset turnover [25]; Singh and Davidson [26]), operating expense to sales ratio [25], administrative expense to sales ratio [26], earnings volatility, advertising and R & D expense to sales ratio, floatation cost (Crutchley and Hansen [22]), and free cash flows [7,8]. Therefore, the paper also intended to empirically test which proxy variable would better serve as the measurement of agency costs.…”

“…For testing how free cash flows and agency costs influence operating performance asin H2, Table 4 displays the regression results based on the models in Equations (7) and (8). As shown in Table 4, the F statistics of both models are 255.814 (p < 0.01) and 272.629 (p < 0.01), indicating a significant goodness of fit.…”

“…The research purpose is therefore three-fold: First, since earlier literature simply regarded FCF as agency costs (see Chung, Firth, and Kim [7,8]) and failed to build up the linkage between FCF and agency costs, the study was intended to fill up the research gap by investigating how the FCFs at management's discretion would influence agency costs. Second, since the results of empirical studies on testing the FCF hypothesis were inconsistent, the study would like to empirically test how FCF would impact on firm performance by using the data of public-listed companies on Taiwan Stock Exchanges (TWSE).…”

Relevance of Discretionary Accruals in Ohlson Model: the Case of Mexico

“…Importantly, we must emphasize that each variable is deflated by total assets before a period of time, to avoid heteroscedasticity problems, according to Chung, et al (2005):…”

Masalah Keagenan Aliran Kas Bebas, Manajemen Laba Dan Relevansi Nilai Informasi Akuntansi

“…Argumentasi yang disampaikan Rahman dan Norman (2008) ialah bahwa manajer pada perusahaan yang memiliki FCFAP cenderung menyalahgunakan wewenang dalam menggunakan aliran kas bebas, yaitu dengan menginvestasikan aliran kas bebas pada projek yang tidak menguntungkan atau projek yang terlalu berisiko yang dapat merugikan perusahaan (Jensen dan Meckling, 1976). Untuk mengkamuflase aktivitas yang menurunkan nilai perusahaan tersebut, manajer melakukan manajemen laba untuk secara oportunis meningkatkan laba yang dilaporkan (Chung et al, 2005). Oleh karena perusahaan yang memiliki FCFAP cenderung melakukan manajemen laba secara oportunis (Chung et al, 2005), maka investor bereaksi negatif dan kemudian berdampak pada turunnya relevansi nilai informasi akuntansi.…”