Studying the Effect of Corporate Governance on the Relationship among Leverage and Free Cash Flow and the Cash Holding Adjustments

Fakhari, Hossien; Asadzadeh, Ahmad

doi:10.22055/jiar.2018.22791.1141

Studying the Effect of Corporate Governance on the Relationship among Leverage and Free Cash Flow and the Cash Holding Adjustments

Document Type : Original Article

Authors

Hossien Fakhari ¹

Ahmad Asadzadeh ²

¹ Associate Professor of Accounting, Mazandaran University, Babolsar, Iran

² M.A. Student of Accounting, Mazandaran University, Babolsar, Iran

10.22055/jiar.2018.22791.1141

Abstract

The aim of this study is an investigating the effect of corporate governance on relationship between leverage and free cash flow with the cash holding adjustments in the listed companies of Tehran Stock Exchange. The importance of this research lies in its role in efficient management of cash holding for achievement of optimal cash also establishing a good policy for cash management. Therefore, information about 60 companies in Tehran Stock Exchange during 2003 to 2015 was gathered and analyzed using the Regression Method. The findings show that there is a direct relationship between the leverage and free cash flow with the cash holding adjustments. Also corporate governance positive effect on the relationship between financial leverage and Free cash flow with the cash holding adjustment. Findings suggest that the corporate governance company can have a direct impact on the relations between free cash flow and leverage and the cash holding adjustment. Findings also suggest that corporate governance can lead to increasing the speed of access to cash optimization and be an obstacle to deviating from the cash optimization.

Keywords

Optimal Cash

Adjustment speeds for cash holding

Leverage

Free cash flow

Corporate Governance