Open Access
Interactions between Free Cash Flow, Debt Policy and Structure of Governance: 3SLS Simultaneous Model
Author(s) -
F. Ben Moussa,
Jameleddine Chichti
Publication year - 2011
Publication title -
journal of management research
Language(s) - English
Resource type - Journals
ISSN - 1941-899X
DOI - 10.5296/jmr.v3i2.614
Subject(s) - free cash flow , debt , cash flow , corporate governance , principal–agent problem , business , monetary economics , finance , economics
This research tests the efficiency of the ownership structure and the debt policy as mechanism of resolution of agency conflicts between shareholders and managers du to the problem of overinvestment, in the limitation of the problem of the free cash flow. by estimating three stage least square simultaneous model and on the basis of a sample of 35 non financial Tunisian listed companies selected for the period 1999–2008, our results are in favor of the theory of free cash flows of Jensen (1986) that stipulates that the debt policy represents the principal governance mechanism that can limit the risk of free cash flow. However, the ownership concentration and managerial ownership increase the risk of the free cash flow.