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Title The effect of financial policy on the agency costs of free cash flow: A theoretical and empirical study with evidence from the oil industry
Creator/Author Byrd, J.W.
Publication Date1988 Jan 01
OSTI IdentifierOSTI ID: 5237503
Resource TypeMiscellaneous
Resource RelationThesis (Ph. D.)
Research OrgOregon Univ., Eugene, OR (USA)
Subject020700 -- Petroleum-- Economics, Industrial, & Business Aspects ;294002 -- Energy Planning & Policy-- Petroleum ;290200 -- Energy Planning & Policy-- Economics & Sociology; ECONOMETRICS;PETROLEUM INDUSTRY-- ECONOMIC ANALYSIS; ACCOUNTING;DATA ANALYSIS;FUNCTIONAL MODELS;OWNERSHIP;REGRESSION ANALYSIS;RESERVES
Related SubjectECONOMICS;INDUSTRY;MATHEMATICS;RESOURCES;STATISTICS
Description/Abstract This study examines the effect of firm financial, ownership, and organizational characteristics on the agency costs of free cash flow.^The study formalizes the expository model presented by Jensen in the article Agency Costs of Free Cash Flow, Corporate Finance and Takeovers, published in the American Economic Review, May, 1986.^Annual financial data for corporations, royalty trusts, and master limited partnerships in the US petroleum industry, for the period 1979 through 1985, are used to test the implications derived from the formal model, as well as supplemental hypotheses from the expository model.^Agency costs are estimated by comparing published measures of the value of a firm`s petroleum reserves to the value of the reserves implied by the market value of the financial claims against the firm.^The empirical tests are primarily based on cross-sectional ordinary least squares (OLS) regression analysis.^The results are consistent with the hypothesis that a negative association exists between debt and agency costs.^Evidence is found, consistent with predictions of the free cash flow theory, that the absence of dividends is associated with increased agency costs.
PublisherEugene, OR (US) ;Univ. of Oregon
Country of PublicationUnited States
LanguageEnglish
FormatPages: (161 p)
AvailabilityUniversity Microfilms, PO Box 1764, Ann Arbor, MI 48106, Order No.89-03,789
System Entry Date2001 May 13

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