An analysis of joint effects of free cash flows and ownership concentration on corporate debt policy
by Dea'a Al-Deen Omar Al-Sraheen; Mohammad Naser Hamdan
Global Business and Economics Review (GBER), Vol. 26, No. 3, 2022

Abstract: Free cash flow and concentrated ownership affect the debt policy of companies, and an emerging economy like Jordan offers an exciting scenario to examine such a phenomenon. The current research emphasises the debt policy of Jordanian industrial listed companies with free cash flow and concentrated ownership. The term of the current study was the five-year period from 2015-2019, using 51 firms with 255 firm-year observations. The findings revealed that an increase in the free cash flow level caused a debt reduction and that concentrated ownership positively influenced debt policy. This study demonstrated that excessive debt would not be prioritised as a desirable financing policy in a company with a high free cash flow level. This led to a reduction in their financial leverage ratios and increased agency costs because debt policy is one mechanism that firms use to decrease agency problems. This study contributes to exploring the implications of the free cash flow hypothesis and concentration of ownership in corporate debt policy to reduce the agency conflict also.

Online publication date: Fri, 22-Apr-2022

The full text of this article is only available to individual subscribers or to users at subscribing institutions.

 
Existing subscribers:
Go to Inderscience Online Journals to access the Full Text of this article.

Pay per view:
If you are not a subscriber and you just want to read the full contents of this article, buy online access here.

Complimentary Subscribers, Editors or Members of the Editorial Board of the Global Business and Economics Review (GBER):
Login with your Inderscience username and password:

Username:        Password:          Forgotten your password?

Want to subscribe?
A subscription gives you complete access to all articles in the current issue, as well as to all articles in the previous three years (where applicable). See our Orders page to subscribe.

If you still need assistance, please email subs@inderscience.com