自由现金流下的过度投资外文翻译.docx

自由现金流下的过度投资外文翻译.docx

《自由现金流下的过度投资外文翻译.docx》由会员分享，可在线阅读，更多相关《自由现金流下的过度投资外文翻译.docx（8页珍藏版）》请在冰豆网上搜索。

自由现金流下的过度投资外文翻译

自由现金流下的过度投资【外文翻译】

本科毕业论文（设计）

文翻译外

原文:

Over-investmentoffreecashflow

Abstract

Thispaperexaminestheextentoffirmlevelover-investmentoffrecashflow.Usinganaccounting-basedframeworktomeasureover-investmentandfreecashflow,Ifindevidencethat,consistentwithagencycostexplanations,over-investmentisconcentratedinfirmswiththehighestlevelsoffreecashflow.Furthertestsexaminewhetherfirms’governancestructuresareassociatedwithover-investmentoffreecash

flow.Theevidencesuggeststhatcertaingovernancestructures,suchasthepresenceofactivistshareholders,appeartomitigateover-investment.

Introduction

Thispaperexaminesfirminvestingdecisionsinthepresenceoffreecashflow.Intheory,firmlevelinvestmentshouldnotberelatedtointernallygeneratedcashflows（Modigliani&Miller,1958）.However,priorresearchhasdocu-mentedapositiverelationbetweeninvestmentexpenditureandcashflow（e.g.,Hubbard,1998）.Therearetwointerpretationsforthispositiverelation.First,thepositiverelationisamanifestationofanagencyproblem,wheremanagersinfirmswithfreecashflowengageinwastefulexpenditure（e.g.,Jensen1986;Stulz1990）.Whenmanagers’objectivesdifferfromthoseofshareholders,thepresenceofinternally

generatedcashflowinexcessofthatrequiredtomaintainexistingassetsinplaceandfinancenewpositiveNPVprojectscreatesthepotentialforthosefundstobesquandered.Second,thepositiverelationreflectscapitalmarketimperfections,wherecostlyexternalfinancingcreatesthepotentialforinternallygeneratedcashflowstoexpandthefeasibleinvestmentopportunityset（e.g.,Fazzari,Hubbard,&Petersen,

1988;Hubbard,1998）.

Thispaperfocusesonutilizingaccountinginformationtobettermeasuretheconstructsoffreecashflowandover-investment,therebyallowingamorepowerfultestoftheagency-basedexplanationforwhyfirmlevelinvestmentisrelatedtointernallygeneratedcashflows.Indoingso,thispaperisthefirsttoofferlargesampleevidenceofover-investmentoffreecashflow.Priorresearch,suchasBlanchard,Lopez-di-Silanes,andVishny（1994）,documentexcessiveinvestmentandacquisitionactivityforelevenfirmsthatexperiencealargecashwindfallduetoalegalsettlement,Harford（1999）findsusingasampleof487takeoverbids,thatcash-richfirmsaremorelikelytomakeacquisitionsthatsubsequentlyexperienceabnormaldeclinesinoperatingperformance,andBates（2005）findsforasampleof400subsidiarysalesfrom1990to1998thatfirmswhoretaincashtendtoinvestmore,relativetoindustrypeers.Thispaperextendsthesesmallsamplefindingsbyshowingthatover-investmentoffreecashflowisasystematicphenomenonacrossalltypesofinvestmentexpenditure.

Theempiricalanalysisproceedsintwostages.First,thepaperusesanaccounting-basedframeworktomeasurebothfreecashflowandover-investment.Freecashflowisdefinedascashflowbeyondwhatisnecessarytomaintainassetsinplaceandtofinanceexpectednewinvestments.Over-investmentisdefinedasinvestmentexpenditurebeyondthatrequiredtomaintainassetsinplaceandtofinanceexpectednewinvestmentsinpositiveNPVprojects.Tomeasureover-investment,Idecomposetotalinvestmentexpenditureintotwocomponents:

（i）requiredinvestment

expendituretomaintainassetsinplace,and（ii）newinvestmentexpenditure.Ithendecomposenewinvestmentexpenditureintoover-investmentinnegativeNPVprojectsandexpectedinvestmentexpenditure,wherethelattervarieswiththefirm’sgrowthopportunities,financingconstraints,industryaffiliationandotherfactors.

Undertheagencycostexplanation,managementhasthepotentialtosquanderfreecashflowonlywhenfreecashflowispositive.Attheotherendofthespectrum,firmswithnegativefreecashflowcanonlysquandercashiftheyareabletoraise“cheap”capital.Thisislesslikelytooccurbecausethesefirmsneedtobeabletoraisefinancingandtherebyplacethemselvesunderthescrutinyofexternalmarkets

（DeAngelo,DeAngelo,&Stulz,2004;Jensen,1986）.Consistentwiththeagencycostexplanation,Ifindapositiveassociationbetweenover-investmentandfreecashflowforfirmswithpositivefreecashflow.Forasampleof58,053firm-yearsduringthe

period1988–2002,Ifindthatforfirmswithpositivefreecashflowtheaveragefirmover-invests20%ofitsfreecashflow.Furthermore,Idocumentthatthemajorityoffreecashflowisretainedintheformoffinancialassets.Theaveragefirminmysampleretains41%ofitsfreecashflowaseithercashormarketablesecurities.There

islittleevidencethatfreecashflowisdistributedtoexternaldebtholdersorshareholders.

Findinganassociationbetweenover-investmentandfreecashflowisconsistentwithrecentresearchdocumentingpoorfutureperformancefollowingfirmlevelinvestmentactivity.Forexample,Titman,Wei,andXie（2004）andFairfield,Whisenant,andYohn（2003）showthatfirmswithextensivecapitalinvestment

activityandgrowthinnetoperatingassetsrespectively,experienceinferiorfuture

stockreturns.Furthermore,Dechow,Richardson,andSloan（2005）findthatcash

flowsretainedwithinthefirm（eithercapitalizedthroughaccrualsor“invested”in

financialassets）areassociatedwithlowerfutureoperatingperformanceandfuturestockreturns.Thisperformancerelationisconsistentwiththeover-investmentoffreecashflowsdocumentedinthispaper.

Thesecondsetofempiricalanalysesexaminewhethergovernancestructuresareeffectiveinmitigatingover-investment.Priorresearchhasexaminedtheimpactofavarietyofgovernancestructuresonfirmvaluationandthequalityofmanagerialdecisionmaking（seeBrown&Caylor,2004;Gompers,Ishii,&Metrick,2003;Larcker,Richardson,&Tuna,2005fordetailedsummaries）.Collectively,theabilityofcross-sectionalvariationingovernancestructurestoexplainfirmvalueand/orfirmdecisionmakingisrelativelyweak.Consistentwiththis,Ifindevidencethatoutofalargesetofgovernancemeasuresonlyafewarerelatedtoover-investment.Forexample,firmswithactivistshareholdersandcertainanti-takeoverprovisionsarelesslikelytoover-investtheirfreecashflow.

1.Freecashflowandover-investment

Thissectiondescribesindetailthevarioustheoriessupportingapositiverelationbetweeninvestmentexpenditureandcashflowandthendevelopsmeasuresoffreecashflowandover-investmentthatcanbeusedtotesttheagencybasedexplanation.1.1.Explanationsforapositiverelationbetweeninvestmentexpenditureandcashflow.

Inaworldofperfectcapitalmarketstherewouldbenoassociationbetweenfirmlevelinvestingactivitiesandinternallygeneratedcashflows.Ifafirmneededadditionalcashtofinanceaninvestmentactivityitwouldsimplyraisethatcashfromexternalcapitalmarkets.IfthefirmhadexcesscashbeyondthatneededtofundavailablepositiveNPVprojects（includingoptionsonfutureinvestment）itwoulddistributefreecashflowtoexternalmarkets.Firmsdonot,however,operateinsuchaworld.Thereareavarietyofcapitalmarketfrictionsthatimpedetheabilityofmanagementtoraisecashfromexternalcapitalmarkets.Inaddition,therearesignificanttransactioncostsassociatedwithmonitoringmanagementtoensurethatfreecashflowisindeeddistributedtoexternalcapitalmarkets.Inequilibrium,thesecapitalmarketfrictionscanserveasasupportforapositiveassociationbetweenfirminvestingactivitiesandinternallygeneratedcashflow.

TheagencycostexplanationintroducedbyJensen（1986）andStulz（1990）suggeststhatmonitoringdifficultycreatesthepotentialformanagementtospendinternallygeneratedcashflowonprojectsthatarebeneficialfromamanagementperspectivebutcostlyfromashareholderperspective（thefreecashflowhypothesis）.Severalpapershaveinvestigatedtheimplicationsofthefreecashflowhypothesisonfirminvestmentactivity.Forexample,Lamont（1997）andBergerand

Hann（2003）findevidenceconsistentwithcashrichsegmentscross-subsidizingmorepoorlyperformingsegmentsindiversifiedfirms.However,theevidenceinthese

paperscouldalsobeconsistentwithmarketfrictionsinhibitingtheabilityofthefirmtoraisecapitalexternallyandnotnecessarilyanindicationofover-investment.

RelatedevidencecanalsobefoundinHarford（1999）andOpler,Pinkowitz,Stulz,andWilliamson（1999,2001）.Harfordusesasampleof487takeoverbidsto

documentthatcashrichfirmsaremorelikelytomakeacquisitionsandthese“cashrich”acquisitionsarefollowedbyabnormaldeclinesinoperatingperformance.Opleretal.（1999）findsomeevidencethatcompanieswithexcesscash（measuredusingbalancesheetcashinformation）havehighercapitalexpenditures,andspendmoreon

acquisitions,evenwhentheyappeartohavepoorinvestmentopportunities（asmeasuredbyTobin’sQ）.Perhapsthemostdirectevidenceontheover-investmentof

freecashflowistheanalysisinBlanchardetal.（1994）.Theyfindthatelevenfirmswithwindfalllegalsettlementsappeartoengageinwastefulexpenditure.

Collectively,priorresearchissuggestiveofanagency-basedexplanationsupportingthepositiverelationbetweeninvestmentandinternallygeneratedcashflow.However,thesepapersarebasedonrelativelysmallsamplesanddonotmeasureover-investmentorfreecashflowdirectly.Thus,thefindingsofearlierworkmaynotbegeneralizabletolargersamplesnorisitdirectlyattributabletotheagencycostexplanation.Moregenerally,acriticismoftheliteratureexaminingtherelationbetweeninvestmentandcash