Open AccessRelationship Between Free Cash Flows and Corporate Governance Levels in the Light of Agency Theory
Author(s) -
Glaysson Aguilar de Araújo,
Lara Correa,
Valéria Gama Fully Bressan,
João Estêvão Barbosa Neto,
Bruna Camargos Avelino
Publication year - 2021
Publication title -
revista catarinense da ciência contábil
Language(s) - English
Resource type - Journals
eISSN - 2237-7662
pISSN - 1808-3781
DOI - 10.16930/2237-7662202132062
Subject(s) - corporate governance , free cash flow , heteroscedasticity , principal–agent problem , business , equity (law) , context (archaeology) , econometrics , financial economics , cash flow , stock (firearms) , accounting , economics , finance , paleontology , political science , law , biology , mechanical engineering , engineering
This research analyzes the relationship between free cash flows (FCFs) and the different levels of Corporate Governance present in the Brazilian stock market. To this end, the sample was composed of 212 Brazilian publicly traded companies listed on Brasil, Bolsa, Balcão [B]³, in the period from 2010 to 2018. The methodology consisted of estimating a regression for panel data, using the random effects model, estimating by generalized least square (GLS) and assuming adjustments for autocorrelation and robust standard errors for heteroscedasticity. The results found, for the sample studied, suggest that Corporate Governance levels are positively related to the FCFs. In synergy, when compared to the Traditional level of [B]³, companies listed on the Novo Mercado and Level 2 levels tend to present higher FCF values. In addition, the larger the size of the companies and the higher their return on equity, the higher their FCFs tend to be, just as companies in stages of maturity tend to present lower FCF values. The relevance of this research is based on analyzing, in a stock market subject to imperfections, factors that may affect decisions about the level of cash maintenance of companies, more specifically by evaluating how Corporate Governance mechanisms relate to the theory of FCFs, in a context of potential conflict of interest.