International Journal of Banking, Risk and Insurance

Open Access Open Access  Restricted Access Subscription Access
Open Access Open Access Open Access  Restricted Access Restricted Access Subscription Access

Investigation of the Impact of Free Cash Flows on Financial Flexibility and Dividend Policy in Firms Listed in Tehran Stock Exchange (TSE)


Affiliations
1 Department of Accounting, Urmia Branch, Islamic Azad University, Urmia, Iran, Islamic Republic of
2 Department of Accounting, Urmia Branch, Islamic Azad University, West Azarbyjan, Iran, Islamic Republic of
     

   Subscribe/Renew Journal


The aim of this study is to investigate the impact of free cash flows on financial flexibility and dividend policy in firms listed in Tehran Stock Exchange (TSE). To measure free cash flow, Ang et al. (2000) is used and financial flexibility is captured by Marchica & Mura (2007) model. The population of the study is firms listed in TSE; however, the study sample consists of 100 firms listed in TSE which is studied during the period of 2007 to 2011. Logistic and pooled regressions are used to test hypotheses. The results show that free cash flows have a positive significant impact on financial flexibility and dividend policy in firms listed in TSE. The results also show that free cash flows are higher when there is a financial flexibility.

Keywords

Free Cash Flows, Financial Flexibility, Dividend Policy.
Subscription Login to verify subscription
User
Notifications
Font Size


  • Ahmed, H., & Javid, A. (2009). The determinants of dividend policy in Pakistan. International Research Journal of Finance and Economic. Retrieved from http://www.eurojournals.com/ finance.htm.

  • Aggarwal, R., & Dow, S. M. (2010). Dividends and strength of Japanese business group affiliation. Journal of Economics and Business, doi:10.1016/j.jeconbus.2012.01.003.

  • Al-Kuwari, D. (2009). Determinants of the dividend policy in emerging stock exchanges: The case of GCC countries.Global Economy & Finance Journal, 2(2).

  • Ang, J. S., Cole, R. A., & Lin, W. J. (2000). Agency cost and ownership structure. Journal of Finance, 55, 81-106.

  • Chen, J., & Dhiensiri, N. (2009). Determinants of dividend policy: The evidence from New Zealand. International Research Journal of Finance and Economic. Retrieved from http://www.eurojournals.com/finance.htm.

  • Cheng, L. T. W., Davidson, W. N., & Leung, T. Y. (2011). Insider trading returns and dividend signals. International Review of Economics and Finance, 20, 421-429.

  • Choy, H. L., Gul, F. A., & Yao, J. (2011). Does political economy reduce agency costs? Some evidence from dividend policies around the world. Journal of Empirical Finance, 18, 16-35.

  • Daniel, N. D., Denis, D. J., & Naveen, L. (2010). Sources of financial flexibility: Evidence from cash flow shortfalls. Retrieved from http://accounting.uwaterloo.ca/Daniel-Denis-Naveen-1.pdf.

  • Denis, D. J. (2011). Financial flexibility and corporate liquidity. Journal of Corporate Finance, 17, 667-674.

  • Dhanani, A. (2005). Corporate dividend policy: The views of British financial managers. Journal of Business Finance & Accounting, 1625-1672.

  • Dewenter, K. L., & Warther, A. W. (1998). Dividends, asymmetric information, and agency conflicts: Evidence from a comparison of the dividend policies of Japanese and U.S. firms. Journal of Finance, 879-904.

  • Easterbrook, F. (1984). Two agency cost explanations of dividends. American Economic Review, 74, 650-659.

  • Frankfurter, G. M., & Wood, B. G. (2002). Dividend policy theories and their empirical tests. International Review of Financial Analysis, (11), 111-138.

  • Hashemi, A., & Akhlaghi, H. (2009). Investigation of the impact of financial leverage, dividend policy and profitability on firms future values. Financial Accounting Research, 6, 38-49.

  • Hussainey, K., Mgbame, C., & Mgbame, M. (2011). Dividend policy and share price volatility: UK evidenc. Journal of Risk Finance, 1526-1559.

  • Karami, G., Mehrani, S., & Askandari, H. (2010). The investigation of agency and signaling theory in dividend policy: The role of institutional ownership. Accounting Advances of Shiraz University, (2), 109-132.

  • Lintner, J. (1962). Dividends, earnings, leverage, stock prices and supply of capital to corporations. The Review of Economics and Statistics, 64, 243-69.

  • Li, K., & Zhao, X. (2008). Asymmetric information and dividend policy. Financial Management, 673-694.

  • Marchica, M., & Mura, R. (2007). Financial flexibility and investmentdecisions. Accounting Horizons, 235-250.

  • Miller, M., & Modigliani, D. (1961). Dividend policy, growth, and the valuation of shares. Journal of Business, 34, 411-433.

  • Nizar, H., & Al-Malkawi, N. (2007). Determinants of corporate dividend policy in Jordan: An application of the Tobit model. Journal of Economic & Administrative Sciences, 23(2).

  • Oded, J., (2008). Payout policy, financial flexibility, and agency costs of free cash flow.Retrieved from http://192.138.193.61/departments/finance/documents/seminars/Jacob OdedPaper.pdf.

  • Rapp, M. S., Schmid, T. S., & Urban, D. L. (2012). The value of financial flexibility and payout policy, Working paper.

  • Rubin, A., & Smith, D. R. (2009). Institutional ownership, volatility and dividends. Journal of Banking & Finance, 33, 627-639.

  • Thanatawee, Y. (2011). Life-cycle theory and free cash flow hypothesis: Evidence from dividend policy in Thailand. Retrieved from http://ssrn.com/abstract=1872686.

  • Wu, M. C., Kao, E. H., & Fung, H. G. (2008). Impact of dividend-protected employee stock options on payout policy: evidence from Taiwan. Pacific Economic Review, 431-452.


Abstract Views: 498

PDF Views: 2




  • Investigation of the Impact of Free Cash Flows on Financial Flexibility and Dividend Policy in Firms Listed in Tehran Stock Exchange (TSE)

Abstract Views: 498  |  PDF Views: 2

Authors

Saeid Jabbarzadeh Kangarlouei
Department of Accounting, Urmia Branch, Islamic Azad University, Urmia, Iran, Islamic Republic of
Banafsheh Ramizipour
Department of Accounting, Urmia Branch, Islamic Azad University, West Azarbyjan, Iran, Islamic Republic of
Morteza Motavassel
Department of Accounting, Urmia Branch, Islamic Azad University, Urmia, Iran, Islamic Republic of

Abstract


The aim of this study is to investigate the impact of free cash flows on financial flexibility and dividend policy in firms listed in Tehran Stock Exchange (TSE). To measure free cash flow, Ang et al. (2000) is used and financial flexibility is captured by Marchica & Mura (2007) model. The population of the study is firms listed in TSE; however, the study sample consists of 100 firms listed in TSE which is studied during the period of 2007 to 2011. Logistic and pooled regressions are used to test hypotheses. The results show that free cash flows have a positive significant impact on financial flexibility and dividend policy in firms listed in TSE. The results also show that free cash flows are higher when there is a financial flexibility.

Keywords


Free Cash Flows, Financial Flexibility, Dividend Policy.

References