Shareholder litigation risk varies across time and across firms. When shareholder litigation risk is high, it can increase (decrease) a firm's cash and investment before (after) a lawsuit filing. When shareholder litigation risk is low, little to no impact occurs. A quasi-natural experiment...

This study investigates how controlling shareholders fraudulently extracted firm value via cash tunnelling from Chinese companies from 1998 to 2011. The evidence suggests that expropriating owners choose a balance sheet account that is not directly related to the firm's operating business in...

Free Cash Flow (FCF) was adopted in the late 1980s as a financial tool to evaluate the firm and its individual projects. We question the procedure of calculating the FCF where a significant portion of Current Liabilities is offset against Current Assets, thereby creating the hybrid asset Net...

This paper presents a simple model for dual-class stock shares, in which common shareholders receive both public and private cash flows (i.e. dividends and any private benefit of holding voting rights) and preferred shareholders only receive public cash flows (i.e. dividends). The dual-class...

I study a protectionist anti-takeover law introduced in 2014 that covers a subset of all firms in the economy. The law decreased affected firms' likelihood of becoming the target of a merger or acquisition and had a negative impact on shareholder value. There is no evidence that management of...

This study examines whether the association between selected governance variables and earnings informativeness depends on surplus free cash flow agency problem in the Malaysian environment, where concentrated shareholding by family members is common and minority investor protection is relatively...

This paper investigates how shocks to expected cash flows influence CEO incentive compensation. Exploiting changes in compliance with environmental regulations as shocks to expected future cash flows, we find that adverse shocks typically prompt corporate boards to recalibrate CEO compensation...

Existing studies on corporate governance mainly focus on how a strong governance system enhances the valuation of firms with cash holding or free cash flow agency problem. The objectives of this paper are threefold. First, it investigates the impact of surplus free cash flows (SFCF) on earnings...

With positive free cash flows, firms can choose between accumulating cash, paying out to shareholders, and reducing debts. However, sometimes creditors include an “excess cash flow sweep” covenant in loan contracts, requiring reduction of debt balances ahead of schedule when free cash flows...

Price is expected cash flows discounted at the risk-free rate and a discount for risk exposure. Price-equivalency does not always imply welfare-equivalency: shareholders are not necessarily indifferent between a price increase of $1 from higher cash flows and the same $1 increase from lower risk...