文档介绍：本科毕业论文(设计)
外文翻译
原文:
Over-investment of free cash flow
Introduction
This paper examines firm investing decisions in the presence of free cash flow. In theory, firm level investment should not be related to internally generated cash flows (Modigliani and Miller, 1958). However, prior research has documented a positive relation between investment expenditure and cash flow (., Hubbard, 1998). There are two interpretations for this positive relation. First, the positive relation is a manifestation of an agency problem, where managers in firms with free cash flow engage in wasteful expenditure (., Jensen 1986 and Stutz 1990). When managers’ objectives differ from those of shareholders, the presence of internally generated cash flow in excess of that required to maintain existing assets in place and finance new positive NPV projects creates the potential for those funds to be squandered. Second, the positive relation reflects capital market imperfections, where costly external financing creates the potential for internally generated cash flows to expand the feasible investment opportunity set (., Fazzari, Hubbard and Petersen 1988 and Hubbard, 1998).
The empirical analysis proceeds in two stages. First, the paper uses an accounting based framework to measure both free cash flow and over-investment. Free cash flow is cash flow beyond what is necessary to maintain assets in place and to finance expected new investments. Over-investment is defined as investment expenditure beyond that required to maintain assets in place and to finance expected new investments in positive NPV projects. To measure over- investment, I pose total investment expenditure into ponents: (i) required investment expenditure to maintain assets in place, and (ii) new investment expenditure. I then pose new investment expenditure into over-investment in negative NPV projects and expected investment expenditure, where the latter varies with the firm’s growth opportunities, financing constra