Conditional tests of corporate governance theories /
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| Format: | Thesis eBook |
| Language: | English |
| Published: |
[College Station, Tex.] :
[Texas A&M University],
[2005]
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| Subjects: | |
| Online Access: | Link to OAK Trust copy |
| Abstract: | Agency theories suggest that governance matters more when agency conflicts are potentially more severe. However, empirical studies often do not control for the potential severity of agency conflicts. I show that the marginal benefit of governance varies with the free cash flow level, a proxy for the potential severity of agency conflicts. As the free cash flow level increases, higher governance quality becomes incrementally more value-enhancing, and lower governance quality becomes incrementally more value-destroying. This is consistent with the hypothesis that better governance helps resolve the agency conflicts in investment decisions when a firm has more free cash flows (Jensen, 1986). This study highlights the importance of controlling for the potential severity of agency conflicts in governance studies and provides an improved method to estimate the marginal benefit of a governance mechanism. |
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| Item Description: | "Major Subject: Finance" Title from author supplied metadata (automated record created on Sep. 21, 2005.) Vita. Abstract. Electronic resource. |
| Format: | Mode of access: World Wide Web. System requirements: World Wide Web access and Adobe Acrobat Reader. |
| Bibliography: | Includes bibliographical references. |