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An analysis of joint effects of investment opportunity set, free cash flows and size on corporate debt policy

journal contribution
posted on 1999-06-01, 00:00 authored by B Jaggi, Ferdinand Gul
This study, based on a sample of 1869 observations from 1989 to 1993 for non-regulated U.S. firms, examines the association between investment opportunity set (IOS), free cashflows (FCF) and debt, and also tests whether ®rm size acts as a moderating variable on this association. The results show that there is a significantly positive association between FCF and debt for low IOS firms, which provide support to Jensen's (1986) ``control hypothesis''. The results also show that the positive association between debt and high FCF for low IOS firms is more pronounced for large firms, suggesting that the ®rm size serves as a moderating variable on the association.

History

Journal

Review of quantitative finance and accounting

Volume

12

Issue

4

Pagination

371 - 381

Publisher

Kluwer Academic Publishers

Location

Berlin, Germany

ISSN

0924-865X

eISSN

1573-7179

Language

eng

Publication classification

C Journal article; C1.1 Refereed article in a scholarly journal

Copyright notice

1999, Kluwer Academic Publishers

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