بررسی نقش نظارتی ساختار مالکیت و خط مشی بدهی بر کنترل مشکلات نمایندگی ناشی از جریان‌های نقدی آزاد شرکت‌های پذیرفته شده در بورس اوراق بهادار تهران

 
Journal of Accounting Advances (J.A.A)
Vol. 6, No. 1, 2014, Ser. 66/3
 
 
Extended Abstract
 
The Monitoring Role of Ownership Structure and Debt Policy on Controlling Agency Problem of Free Cash Flow of Companies
 Listed in the Tehran Stock exchange (TSE)
 
           Dr. H. Fakhari                            Dr. M. Kashani Pour        
     University of Mazandaran             University of Tehran-Qom Collage
M. A. Rajabbeyki
University of Mazandaran
Introduction
       The agency problem is one of the controversial subjects in accounting and finance literature. Also the existence of free cash flow (FCF) is one of the important elements in the occurrence of agency costs, because conflict of interest between manager and stockholder causes managers to use FCF in their own interest. Debt policy and ownership structure can reduce agency cost of FCF. Jensen (1986) cites debt Policy to reduce agency cost in two aspects; the first aspect is related to pressure of debt contract. Another aspect is related to asymmetric information between manager and creditor causing asset substitution, adverse selection and ethical hazards. On other hand, ownership structure as one of the corporate governance mechanisms can reduce agency costs of FCF, since a company with good governance can direct activities of the company on a good course, and by good governance decrease the agency cost of all contracts of the company with the other parties. In this research we use proxies for measuring ownership structure which include ownership concentration, managerial ownership, and institutional ownership.
       In spite of a large amount of research in other countries about agency cost of FCF, there is not enough research in an emerging market such as Iran. So this research investigates simultaneous relationship between FCF and debt policy and ownership structure.
We hope our results will be useful for standard sitters and exchange market policy makers to establish several standards and regulations about voluntary disclosure of FCF. Finally the questions: is there simultaneous relationship between FCF and leverage? And what are the impacts of ownership structure on this relationship?
 
Hypotheses
Our hypotheses following the preceding literature are:
H1: There is a simultaneous relationship between FCF and debt policy.
H2: Ownership concentration affects simultaneous relationship between FCF and debt policy.
H3: Managerial ownership affects simultaneous relationship between FCF and debt policy.
H4: Institutional ownership affects simultaneous relationship between FCF and debt policy.
 
Method
       We use panel data analysis method by estimating three stage least square model on the basis of a sample of 103 non-financial companies listed in Tehran Stock Exchange for the period 2006-2011. Simultaneous Model is used when several dependent variables are interacting with each other; in such a situation it is required to define a system of equation. Our variables include FCF, lev and ownership structure of which ownership structure includes ownership concentration, managerial ownership, and institutional ownership. In addition to the above main variable we consider state ownership, firm size, tangible assets, profitability, tax, growth opportunity and risk which have a fixed effect on our model.
Our simultaneous equations are:
FCF_{i, t} = α₀ + α₁ Leverage_{i, t} + α₂ Conc_{i, t} + α₃ Man_{i, t} +α₄ Inst_{i, t} + α₅ State_{i, t} + α₆ Size_{i, t} + ε_{1i, t}                                                                                                                                             (1)
Leverage_{i, t} = β₀ + β₁FCF _{i, t} + β₂ Tang_{i, t} + β₃ Tax_i,t + β₄ Growth_i,t + β₅ Size_i,t + β₆ Profit_i,t + β₇ Risk_it, + ε_2i                                                                                 (2)
 
Discussion and conclusion
       The main purpose of our study is an investigation of simultaneous relationship between free cash flow and debt policy and also the impact of ownership structure on this relationship. Our research is based on the theoretical idea that there is interest of conflict and asymmetric information between managers and other stakeholders, and debt policy and ownership structure can reduce agency costs of company. Our findings show that firms with high leverage have lower FCF; thus there is a negative relationship between FCF and debt policy. Also, ownership concentration has a negative relationship with FCF; in spite of expectations there is a positive relationship between managerial ownership and institutional ownership.
       Our findings are consistent with other research such as those of Agostinho and Prudencio (2010) and Fatma and Chichti (2011) about the relationship between FCF and leverage; also with Driffield et al. (2007) about impact of ownership concentration on FCF. Additionally our findings confirm the results of Fleming et al. (2005) and Mcknight and Weir (2009) and Fatma and Chichti (2011) about the effect of managerial ownership on FCF. However, they don’t confirm the results of Darren (2010) about the effect of institutional ownership on FCF. Our findings contribute to literature of FCF and are useful for standard sitter and exchange market policy maker.
 
Keywords: Free Cash Flow, Debt Policy, ownership Structure,
 
 
 
 Simultaneo
us Model