| Title | Free cash flow, over-investment and corporate governance in China |
| Creator | |
| Date Issued | 2016-04-01 |
| Source Publication | Pacific Basin Finance Journal
 |
| ISSN | 0927-538X |
| Volume | 37Pages:81-103 |
| Abstract | We investigate whether and how free cash flow and corporate governance characteristics affect firm level investments, using a sample of 865 Chinese listed firms. Consistent with the agency cost explanation, we find that firms' over-investment is more sensitive to current free cash flow and that over-investment is more pronounced in firms with positive free cash flows. Also, we find that certain corporate governance characteristics are significantly related to firm level investment. Further, we divide the full sample into two subsamples: over-investment firms and under-investment firms. For over-investment firms, our evidence indicates that higher state-ownership concentration boosts over-investment, while firms with higher proportion of tradable shares, larger board size of supervisors or higher leverage mitigate over-investment. For under-investment firms, our evidence shows that firms with higher state-ownership concentration, larger board size of directors or higher proportion of outside directors are associated with severer under-investment, while firms with higher leverage or higher proportion of tradable shares alleviate under-investment. |
| Keyword | China Corporate governance Free cash flow Over-investment |
| DOI | 10.1016/j.pacfin.2015.06.003 |
| URL | View source |
| Language | 英语English |
| Scopus ID | 2-s2.0-84960849840 |
| Citation statistics | |
| Document Type | Journal article |
| Identifier | http://repository.uic.edu.cn/handle/39GCC9TT/6411 |
| Collection | Beijing Normal-Hong Kong Baptist University |
| Corresponding Author | Xu，Xiaodong |
| Affiliation | 1.Department of Accountancy,Antai College of Economics and Management,Shanghai Jiao Tong University,Shanghai,535 Fahua Zhen Road,200052,China 2.Division of Business and Management,United International College,Beijing Normal University,Hong Kong Baptist University,Zhuhai, Guangdong,28 Jinfeng Road,519085,China |
| Recommended Citation GB/T 7714 | Chen，Xin,Sun，Yong,Xu，Xiaodong. Free cash flow, over-investment and corporate governance in China[J]. Pacific Basin Finance Journal, 2016, 37: 81-103. |
| APA | Chen，Xin, Sun，Yong, & Xu，Xiaodong. (2016). Free cash flow, over-investment and corporate governance in China. Pacific Basin Finance Journal, 37, 81-103. |
| MLA | Chen，Xin,et al."Free cash flow, over-investment and corporate governance in China". Pacific Basin Finance Journal 37(2016): 81-103. |
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