Journal of Financial Economics Vol. 29 No. 2 1991
A test of the free cash flow hypothesis
Abstract
We develop a measure of free cash flow using Tobin's q to distinguish between firms that have good investment opportunities and those that do not. In a sample of successful tender offers, bidder returns are significantly negatively related to cash flow for low q bidders but not for high q bidders; further, the relation between cash flow and bidder returns differs significantly for low q and high q bidders. This result holds for several cash flow measures suggested in the literature and also in multivariate regressions controlling for bidder and contest-specific characteristics.
- DOI
- 10.1016/0304-405x(91)90005-5
- Volume
- 29
- Issue
- 2
- Pages
- 315-335
- Language
- en
- Sources
- bibtex:phds-export.bib openalex crossref