外文翻译过度投资的自由现金流量.docx
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外文翻译过度投资的自由现金流量.docx
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外文翻译过度投资的自由现金流量
本科毕业论文(设计)
外文翻译
原文:
Over-investmentoffreecashflow
Thispaperexaminesfirminvestingdecisionsinthepresenceoffreecashflow.Intheory,firmlevelinvestmentshouldnotberelatedtointernallygeneratedcashflows(Modigliani&Miller,1958).However,priorresearchhasdocumentedapositiverelationbetweeninvestmentexpenditureandcashflow(e.g.,Hubbard,1998).Therearetwointerpretationsforthispositiverelation.First,thepositiverelationisamanifestationofanagencyproblem,wheremanagersinfirmswithfreecashflowengageinwastefulexpenditure(e.g.,Jensen1986;Stulz1990).Whenmanagers’objectivesdifferfromthoseofshareholders,thepresenceofinternallygeneratedcashflowinexcessofthatrequiredtomaintainexistingassetsinplaceandfinancenewpositiveNPVprojectscreatesthepotentialforthosefundstobesquandered.Second,thepositiverelationreflectscapitalmarketimperfections,wherecostlyexternalfinancingcreatesthepotentialforinternallygeneratedcashflowstoexpandthefeasibleinvestmentopportunityset(e.g.,Fazzari,Hubbard,&Petersen,1988;Hubbard,1998).
Thispaperfocusesonutilizingaccountinginformationtobettermeasuretheconstructsoffreecashflowandover-investment,therebyallowingamorepowerfultestoftheagency-basedexplanationforwhyfirmlevelinvestmentisrelatedtointernallygeneratedcashflows.Indoingso,thispaperisthefirsttoofferlargesampleevidenceofover-investmentoffreecashflow.Priorresearch,suchasBlanchard,Lopez-di-Silanes,andVishny(1994),documentexcessiveinvestmentandacquisitionactivityforelevenfirmsthatexperiencealargecashwindfallduetoalegalsettlement,Harford(1999)findsusingasampleof487takeoverbids,thatcash-richfirmsaremorelikelytomakeacquisitionsthatsubsequentlyexperienceabnormaldeclinesinoperatingperformance,andBates(2005)findsforasampleof400subsidiarysalesfrom1990to1998thatfirmswhoretaincashtendtoinvestmore,relativetoindustrypeers.Thispaperextendsthesesmallsamplefindingsbyshowingthatover-investmentoffreecashflowisasystematicphenomenonacrossalltypesofinvestmentexpenditure.
Theempiricalanalysisproceedsintwostages.First,thepaperusesanaccounting-basedframeworktomeasurebothfreecashflowandover-investment.Freecashflowisdefinedascashflowbeyondwhatisnecessarytomaintainassetsinplaceandtofinanceexpectednewinvestments.Over-investmentisdefinedasinvestmentexpenditurebeyondthatrequiredtomaintainassetsinplaceandtofinanceexpectednewinvestmentsinpositiveNPVprojects.Tomeasureover-investment,Idecomposetotalinvestmentexpenditureintotwocomponents:
(i)requiredinvestmentexpendituretomaintainassetsinplace,and(ii)newinvestmentexpenditure.Ithendecomposenewinvestmentexpenditureintoover-investmentinnegativeNPVprojectsandexpectedinvestmentexpenditure,wherethelattervarieswiththefirm’sgrowthopportunities,financingconstraints,industryaffiliationandotherfactors.
Undertheagencycostexplanation,managementhasthepotentialtosquanderfreecashflowonlywhenfreecashflowispositive.Attheotherendofthespectrum,firmswithnegativefreecashflowcanonlysquandercashiftheyareabletoraise‘‘cheap’’capital.Thisislesslikelytooccurbecausethesefirmsneedtobeabletoraisefinancingandtherebyplacethemselvesunderthescrutinyofexternalmarkets(DeAngelo,&Stulz,2004;Jensen,1986).Consistentwiththeagencycostexplanation,Ifindapositiveassociationbetweenover-investmentandfreecashflowforfirmswithpositivefreecashflow.Forasampleof58,053firm-yearsduringtheperiod1988–2002,Ifindthatforfirmswithpositivefreecashflowtheaveragefirmover-invests20%ofitsfreecashflow.Furthermore,Idocumentthatthemajorityoffreecashflowisretainedintheformoffinancialassets.Theaveragefirminmysampleretains41%ofitsfreecashflowaseithercashormarketablesecurities.Thereislittleevidencethatfreecashflowisdistributedtoexternaldebtholdersorshareholders.
Findinganassociationbetweenover-investmentandfreecashflowisconsistentwithrecentresearchdocumentingpoorfutureperformancefollowingfirmlevelinvestmentactivity.Forexample,Titman,Wei,andXie(2004)andFairfield,Whisenant,andYohn(2003)showthatfirmswithextensivecapitalinvestmentactivityandgrowthinnetoperatingassetsrespectively,experienceinferiorfuturestockreturns.Furthermore,Dechow,Richardson,andSloan(2005)findthatcashflowsretainedwithinthefirm(eithercapitalizedthroughaccrualsor‘‘invested’’infinancialassets)areassociatedwithlowerfutureoperatingperformanceandfuturestockreturns.Thisperformancerelationisconsistentwiththeover-investmentoffreecashflowsdocumentedinthispaper.
Thesecondsetofempiricalanalysesexaminewhethergovernancestructuresareeffectiveinmitigatingover-investment.Priorresearchhasexaminedtheimpactofavarietyofgovernancestructuresonfirmvaluationandthequalityofmanagerialdecisionmaking.Collectively,theabilityofcross-sectionalvariationingovernancestructurestoexplainfirmvalueand/orfirmdecisionmakingisrelativelyweak.Consistentwiththis,Ifindevidencethatoutofalargesetofgovernancemeasuresonlyafewarerelatedtoover-investment.Forexample,firmswithactivistshareholdersandcertainanti-takeoverprovisionsarelesslikelytoover-investtheirfreecashflow.
Thenextsectiondevelopstestablehypothesesconcerningtherelationbetweenfreecashflowandover-investment.Section2describesthesampleselectionandvariablemeasurement.Sectiondiscussesempiricalresultsfortheover-investmentoffreecashflow.Section4containsempiricalanalysisexaminingthelinkbetweencorporategovernanceandtheover-investmentoffreecashflow,whilesection5concludes.
1.Freecashflowandover-investment
Thissectiondescribesindetailthevarioustheoriessupportingapositiverelationbetweeninvestmentexpenditureandcashflowandthendevelopsmeasuresoffreecashflowandover-investmentthatcanbeusedtotesttheagencybasedexplanation.
1.1.Explanationsforapositiverelationbetweeninvestmentexpenditureandcashflow
Inaworldofperfectcapitalmarketstherewouldbenoassociationbetweenfirmlevelinvestingactivitiesandinternallygeneratedcashflows.Ifafirmneededadditionalcashtofinanceaninvestmentactivityitwouldsimplyraisethatcashfromexternalcapitalmarkets.IfthefirmhadexcesscashbeyondthatneededtofundavailablepositiveNPVprojects(includingoptionsonfutureinvestment)itwoulddistributefreecashflowtoexternalmarkets.Firmsdonot,however,operateinsuchaworld.Thereareavarietyofcapitalmarketfrictionsthatimpedetheabilityofmanagementtoraisecashfromexternalcapitalmarkets.Inaddition,therearesignificanttransactioncostsassociatedwithmonitoringmanagementtoensurethatfreecashflowisindeeddistributedtoexternalcapitalmarkets.Inequilibrium,thesecapitalmarketfrictionscanserveasasupportforapositiveassociationbetweenfirminvestingactivitiesandinternallygeneratedcashflow.
TheagencycostexplanationintroducedbyJensen(1986)andStulz(1990)suggeststhatmonitoringdifficultycreatesthepotentialformanagementtospendinternallygeneratedcashflowonprojectsthatarebeneficialfromamanagementperspectivebutcostlyfromashareholderperspective(thefreecashflowhypothesis).Severalpapershaveinvestigatedtheimplicationsofthefreecashflowhypothesisonfirminvestmentactivity.Forexample,Lamont(1997)andBergerandHann(2003)findevidenceconsistentwithcashrichsegmentscross-subsidizingmorepoorlyperformingsegmentsindiversifiedfirms.However,theevidenceinthesepaperscouldalsobeconsistentwithmarketfrictionsinhibitingtheabilityofthefirmtoraisecapitalexternallyandnotnecessarilyanindicationofover-investment.RelatedevidencecanalsobefoundinHarford(1999)andOpler,Pinkowitz,Stulz,andWilliamson(1999,2001).Harfordusesasampleof487takeoverbidstodocumentthatcashrichfirmsaremorelikelytomakeacquisitionsandthese‘‘cashrich’’acquisitionsarefollowedbyabnormaldeclinesinoperatingperformance.Opleretal.(1999)findsomeevidencethatcompanieswithexcesscash(measuredusingbalancesheetcashinformation)havehighercapitalexpenditures,andspendmoreonacquisitions,evenwhentheyappeartohavepoorinvestmentopportunities(asmeasuredbyTobin’sQ).Perhapsthemostdirectevidenceontheover-investmentoffreecashflowistheanalysisinBlanchardetal.(1994).Theyfindthatelevenfirmswithwindfalllegalsettlementsappeartoengageinwastefulexpenditure.
Collectively,priorresearchissuggestiveofanagency-basedexplanationsupportingthepositiverelationbetweeninvestmentandinternallygeneratedcashflow.However,thesepapersarebasedonrelativelysmallsamplesanddonotmeasureover-investmentorfreecashflowdirectly.Thus,thefindingsofearlierworkmaynotbegeneralizabletolargersamplesnorisitdirectlyattributabletotheagencycostexplanation.Moregenerally,acriticismoftheliteratureexaminingtherelationbetweeninvestmentandcashflowisthatfindingapositiveassociationmaymerelyindicatethatcashflowsserveasaneffectiveproxyforinvestmentopportunities.Myaimistobettermeasuretheconstructsoffreecashflowandover-investmentbyincorporatinganaccounting-basedmeasureofgrowthopportunities,andtestwhethertherelationisevidentinalargesampleoffirm
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- 外文 翻译 过度 投资 自由 现金流量