Investor Power, Creditor Power, and Cash Flow Use: International Evidence

摘要

How corporate decisions are affected by conflict of interest between corporate managers and atomistic firm owners has attracted extensive attention in the finance literature. Theory suggests several reasons why managerial objectives can diverge from those of the shareholders. One recent line of research investigates the premise that liquid assets offer greater flexibility to managers interested in pursuing personal objectives at the expense of the shareholders. This is because liquid assets can be diverted more easily (Myers and Rajan, 1998), and also because managers with financial slack are able to avoid the monitoring by external investors when they pursue private benefits. Therefore cash, being the most liquid asset, has become a key variable of interest in the managerial agency cost literature.