A test of the free cash flow hypothesis

TL;DR: Corporate Governance as mentioned in this paper surveys research on corporate governance, with special attention to the importance of legal protection of investors and of ownership concentration in corporate governance systems around the world, and shows that most advanced market economies have solved the problem of corporate governance at least reasonably well, in that they have assured the flows of enormous amounts of capital to firms, and actual repatriation of profits to the providers of finance.

TL;DR: The last two decades indicate corporate internal control systems have failed to deal effectively with these changes, especially slow growth and the requirement for exit as mentioned in this paper, which is a major challenge for Western firms and political systems as these forces continue to work their way through the worldwide economy.

TL;DR: This paper examined a sample of 12,023 acquisitions by public firms from 1980 to 2001 and found that the announcement return for acquiring-firm shareholders is roughly two percentage points higher for small acquirers irrespective of the form of financing and whether the acquired firm is public or private.

TL;DR: In this article, the extent of firm level over-investment of free cash flow is examined and the evidence suggests that certain governance structures, such as the presence of activist shareholders, appear to mitigate overinvestment.

TL;DR: In this paper, a firm that must issue common stock to raise cash to undertake a valuable investment opportunity is considered, and an equilibrium model of the issue-invest decision is developed under these assumptions.

TL;DR: In this paper, the benefits of debt in reducing agency costs of free cash flows, how debt can substitute for dividends, why diversification programs are more likely to generate losses than takeovers or expansion in the same line of business or liquidationmotivated takeovers, and why the factors generating takeover activity in such diverse activities as broadcasting and tobacco are similar to those in oil.

TL;DR: A review of the scientific literature on the market for corporate control can be found in this paper, where the authors argue that corporate control is best viewed as an arena in which managerial teams compete for the rights to manage corporate resources.

TL;DR: The hubris hypothesis is advanced as an explanation of corporate takeovers by Jensen and Ruback as mentioned in this paper, who argued that the evidence supports the hubris hypotheses as much as it supports other explanations such as taxes, synergy, and inefficient target management.