@article{article_329721, title={Is Excess Free Cash Flow Over-Invested? Evidence from Borsa İstanbul}, journal={Marmara Üniversitesi İktisadi ve İdari Bilimler Dergisi}, volume={39}, pages={1–17}, year={2017}, DOI={10.14780/muiibd.329721}, author={Ataünal, Levent and Aybars, Aslı}, keywords={Serbest nakit akışı hipotezi,Vekâlet teorisi,Temsil maliyeti,Fazla Yatırım}, abstract={<p>In a perfect capital market, investments should not be related to cash flows of the firm. Investments </p> <p>should only be determined by the amount of renewal investments required and growth opportunities </p> <p>available to the firm. Contrarily, due to the conflicts of interest between the managers and the </p> <p>shareholders, the theory on agency costs and free cash flow hypothesis propose that managers are </p> <p>inclined to over-use free cash flow, which is in excess of value-adding investments. It is claimed that </p> <p>firms invest their extra free cash flow on projects with returns below cost of capital of the firm. Some </p> <p>prior studies made on the topic implied the validity of this hypothesis. In other words, firm’s resources </p> <p>might be wasted by means of over-investing. This study, based on a panel data of 154 Borsa Istanbul </p> <p>firms observed between 2005-2015, confirmed that firms over-invest when there is free cash flow </p> <p>available in excess of growth opportunities and dividends. Prior studies have used mostly regression </p> <p>models or Tobin’s q to estimate investment prospects of the firm. However, this study adopted a direct </p> <p>method to estimate investment opportunities available to the firm. </p>}, number={1}, publisher={Marmara University}