Issue

Vol. 5 No. 11 (2022): American Journal of Economics and Business Management

Creative Commons License

This work is licensed under a Creative Commons Attribution 4.0 International License.

The Effect of Free Cash Flow on the Efficiency of Investment Decisions in a Sample of Iraqi Companies Listed on the Iraqi Stock Exchange

https://doi.org/10.31150/ajebm.v5i11.1677
Hashim Hayder Yousef
Master. Student. Faculty of Administration and Economics, Department of Accounting / University of Kufa, Najaf, Iraq
Dr. Hassnain Kazem Ojah
Assist. Prof, Faculty of Administration and Economics, Department of Accounting / University of Kufa, Najaf, Iraq

Corresponding Author(s) : Hashim Hayder Yousef

Yousef@gmail.co

American Journal of Economics and Business Management, Vol. 5 No. 11 (2022): American Journal of Economics and Business Management

Abstract

The research aims to measure the impact of free cash flow on the efficiency of investment decisions, and this goal is achieved by identifying the concept of free cash flow and the concept of the efficiency of investment decisions, and identifying the impact of cash flow on the efficiency of investment decisions, by relying on annual financial reports data for a sample of Iraqi companies Listed in the Iraq Stock Exchange, which numbered (27) companies, represented by (15) companies from the banking sector, (8) companies from the industrial sector and (4) companies from the insurance sector for the period from (2011-2020).


For the purpose of measuring free cash flow, the model (Brigham & Houston, 2019) was used, and the model (Richardson, 2006) was used to measure the efficiency of investment decisions.


The research reached several results, the most important of which is that there is a statistically significant effect of free cash flow on the efficiency of investment decisions.


The most important thing recommended by the researcher is the need for companies listed in the Iraqi Stock Exchange to provide sufficient information about the free cash flow (FCF) and optional disclosure about it because this disclosure provides important information for all parties that have interests and objectives linked to the firm, and helps them in making investment decisions related to the firm as well. Study and analyze the financial data for making investment decisions in detail and follow the methods of evaluating investment projects (economic feasibility study) to prevent wrong (sub-optimal) investment decisions that result in huge irreversible losses.

Keywords

Investment Stock Exchange
Yousef, H. H. ., & Ojah, D. H. K. . (2022). The Effect of Free Cash Flow on the Efficiency of Investment Decisions in a Sample of Iraqi Companies Listed on the Iraqi Stock Exchange. American Journal of Economics and Business Management, 5(11), 176–191. https://doi.org/10.31150/ajebm.v5i11.1677
Download Citation
Endnote/Zotero/Mendeley (RIS)
BibTeX
References
  1. Abbas, Zahraa Hussein. (2021). “Free cash flows and their impact on agency cost and financial performance of a sample of banks listed in the Iraq Stock Exchange.” Kufa University, College of Administration and Economics, a master’s thesis.
  2. Ajmal,M.M.,Saleem,Q.,Zaheer,M.A.,&Ullah,K.(2022).Free Cash Flow Indicators in Textile Sector of Pakistan. Journal of ISOSS,8(1),183-192.
  3. Alain,A.M.,Aldoseri,M.M,&Melegy,M.A.(2021).Measuring the Effect of International Financial Reporting Standards on Quality of Accounting Performance and Efficiency of Investment Decisions .Contents Lists Available at Growing Science Accounting ,249-256.
  4. AlHadi,A.,Hasan,M.,Taylor,G.,Hossain,M.,&Richardson,G.(2016).Market Risk Disclosures and Investment Efficiency: International Evidence From the Gulf Cooperation Council Financial Firms .Journal of International Financial Management and Accounting,1-46.
  5. Alnawaiseh,M.A.L.I,Alomari,R.M.,AlRawashdeh,F.,&Alnawaiseh,M.B.(2017).The Effect of Free Cash Flow on the Company's Financial Polices :Evidence From Jordan. International Journal Economic Research,14,1-9.
  6. Al-Sayegh, Emad Saad Mohamed, Al-Majeed, Hamida Mohamed Abdel. (2015). “Measuring the impact of the quality of financial reports on the efficiency of investment decisions for Egyptian companies.” Accounting and Auditing Journal, Volume 3, Issue 1, Pages 1-49.
  7. Al-Zayyat, Safwan Abdul-Karim. (2014). “Agency costs for free cash flows and their impact on the performance and value of the company: A field study on companies listed on the Amman Stock Exchange.” Yarmouk University, Faculty of Economics and Administrative Sciences, Master's Thesis.
  8. Ambreen,S.,&Aftab,J.(2016).Impact of Free Cash Flow on Profitability of Firms Listed in Karachi Stock Exchange .Euro-Asian Journal of Economics and Finance,4(4),113-122.
  9. Andre,P.,Filip,A.,&Marmousez,S.(2014).The Impact of IFRS on the Relationship Between Conservatism and Investment Efficiency .Comptabilite Controle Audit,20(3),101-124.
  10. Balakrishnan,K.,Watts,R.,&Zuo,L.(2016).The Effect of Accounting Conservatism on Corporate Investment During the Global Financial Crisis .Journal of Business Finance &Accounting, 43(5),1-58.
  11. Bhandari,S.B.,&Adams,M.T.(2017).On the Definition ,Measurement ,and Use of the Free Cash Flow Concept in Financial Reporting and Analysis :A review and Recommendations. Journal of Accounting and Finance ,17(1),11-19.
  12. Brigham,E.F.,&Houston,J.F.(2019).Fundamentals of Financial Management .15th Editiuon ,Boston ,Cengage Learning Inc.
  13. Cherkasova,V.,&Rasadi,D.(2017).Earnings Quality and Investment Efficiency :Evidence from Eastern Europe .Review of Economic Perspectives,17(4),441-468.-84
  14. Cherkasova,V.,&Zakharova,E.(2016).Suboptimal Investments and M&A Deals in Emerging Capital Markets .Economic Annals,93-120.
  15. Eklesiawati,E.,&Novyarni,N.(2020).The Effect of Free Cash Flow, Liquidity and Leverage on Payout Ratio Dividends in Manufacturing Companies Listed in Indonesia Stock Exchange Period 2014-2019).Journal Sekolah Tinggi Ilmu Ekonomi Indonesia,1(1),1-23.
  16. Elberry,N.,&Hussainey,K.(2020).Does Corporate Investment Efficiency affect Corporate Disclosure Practices ?.Journal of Applied Accounting Research,21(2),309-327.-3.
  17. Houcine,A.,&Kolsi,M.C.(2017).The Effect of Financial Reporting Quality on Corporate Investment Efficiency :Evidence from the Tunisian Stock Market. Research in International Business and Finance,1-34.
  18. Hu,J.,Jiang,H.,&Holmes,M.(2019).Government Subsidies and Corporate Investment Efficiency :Evidence From China .Emerging Markets Review,1-33.
  19. Ibrahim,A.,& Ibrahim,A.(2021).The Impact of Risk Disclosure on Investment Efficiency :Evidence From Egypt. Alexandria Journal of Accounting Research,1(5),1-39.
  20. Iskandar,T.M.,Bukit,R.B.,&Sanusi,Z.M.(2012).The Moderating Effect of Ownership Structure on the Relationship Between Free Cash Flow and Asset Utilisation .Asian Academy of Management Journal of Accounting and Finance,8(1),69-89.
  21. Kantudu,A.S.,&Umar,A.S.(2021).Free Cash Flow and Investment Efficiency of Listed Manufacturing Companies in Nigeria. SEISENSE Journal of Management,4(4),77-88.
  22. Knetsch,A.(2020).Corporate Investment Efficiency and Its Determinants.(Doctoral in Economics and Social Sciences)
  23. Komal,Z.H.,Saeed,S.,&Qazi,I.I.(2022).Impact of Free Cash Flow on the Financial Performance: Evidence from Commercial Banks of Pakistan .Pakistan Journal of Social Research,4(2),545-551.
  24. Lai,S.M.,Liu,C.L.,&Wang,T.(2013).Increased Disclosure and Investment Efficiency .Asia-Pacific Journal of Accounting &Economics,21(3),1-20.
  25. Lara,J.M.G,Osma,B.G,&Penalva,F.(2020).Accounting Conservatism and Firm Investment Efficiency .Journal of Accounting and Economics,61(1),1-45.
  26. Lee,M.T.(2020).Corporate Social Responsibility and Investment Efficiency :Evidence from an Emerging Asian Market .DLSU Business& Economics Review,29(2),1-16.
  27. Moez,E.,&Amina,Z.(2018).Overinvestment of Free Cash Flow and Managers Overconfidence. International Business Research,11(3),48-57.
  28. Muchtar,D.,Bensaadi,I.,Husein,R.,&Gani,A.(2021).Corporate Governance ,Institutional Ownership ,Free Cash Flow and Investment Efficiency :Evidence of Indonesian Agriculture Firm. International Journal Economic ,Business, Accounting ,Agriculture Management and Sharia Administration(IJEBAS),1(2),355-364.
  29. Mundia,W.I.(2016).Relationship Between Free Cash Flows and Stock Prices of Non-Financial Firms Listed At the Nairobi Securities Exchange.(Master of Business Administration ,University of Nairobi).
  30. Na,S.(2018).The Free Cash Flow and Corporate Returns.(Master of Science ,Utah State University).
  31. Nurdani,R.,&Rahmawati,I.Y.(2020).The Effect of Firm Sizes ,Profitability ,Dividend Policy ,Asset Structure ,Sales Growth and Free Cash Flow on Debt Poliy (On Manufacturing Companies Listed on the Indonesia Stock Exchange 2015-2018). Andalas Management Review,4(1),100-119.
  32. Qeshta, Ahmed Samir. (2020). “Explanation of the relationship between free cash flows and the financing structure, an applied study on companies listed on the Palestine Stock Exchange.” Al-Azhar University-Gaza, Faculty of Economics and Administrative Sciences, Master's Thesis.
  33. Rad,S.S.E,Embong,Z.,Saleh,N.M.,&Jaffar,R.(2016).Financial Information Quality and Investment Efficiency: Evidence from Malaysia .Asian Academy of Management Journal of Accounting and Finance,12(1),129-151.
  34. Rajapaksha,R.A.S.,&Weerawickrama,V.L.(2020).The Impact of Free Cash Flow on Profitability of Listed Diversified Holding Companies in the Colombo Stock Exchange .The Conference Proceedings of 11Th International Conference on Business & Information ICBI,41-55.
  35. Rochmah,H.N.,&Ardianto,A.(2020).Catering Dividend: Dividend Premium and Free Cash Flow on Dividend Policy .Rochmah &Ardianto,Cogent Business&Management,7,1-16.
  36. Sapuan,N.M.,Wahab,N.A.,Fauzi,M.A.,&Omonov,A.(2021).Anaysing the Impacts of Free Cash Flow and Agency Cost Towards Firm Performance in the Public Listed Companies in Malaysia .Journal of Governance and Integrity(JGI),5(1),211-218.
  37. Sciences,6(3),108-116.
  38. Shin,Y.Z.,Chang,J.Y.,Jeon,K.,&Kim,H.(2019).Female directors on the board and Investment Efficiency :Evidence from Korea .Asian Business &Management ,1-42.
  39. Tamasila,M.,Miclea,S.,Vartolomei,M.,Pascu,D.,&Albulescu,C.T.(2018).Cash Flow and Investment Decision: An Application on the Romanian Agriculture Sector. Procedia-Social and Behavioral Sciences,704-713
  40. Trisna,I.K.E.R.,&Gayatri.(2019).Ukuran Perusahaan Memoderasi Pengaruh Free Cash Flow dan Leverage Terhadap Kebijakan Dividen.E-Journal Akuntansi Universitas Udayana,26(1),454-509.
  41. Wang,F.,Zhu,Z.,&Hoffmire,J.(2015).Financial Reporting Quality ,Free Cash Flow, Investment Efficiency. SHS Web of Conferences,17,1-10.
  42. Wang,G.Y.(2010).The Impacts of Free Cash Flows and on Firm Performance. J. Service Science &Management ,3,408-418.
  43. Widyanti,N.,&Widyasari,W.(2019).Factors Affecting Free cash Flow (FCF) With Dividend Policy as a Mediating .Advances in Economics ,Business and Management Research ,145,340-345.
  44. Yeo,H.J.(2018).Role of Free Cash Flows in Making Investment and Dividend Decisions: The Case of the Shipping Industry. The Asian Journal of Shipping and Logistics,34(2),113-118.
  45. Zhu,X.,&Lin,Y.(2017).Does Lean Manufacturing Improve Firm Value ?.Journal of Manufacturing Technology Management,28(4),422-437.
Read More
Author biographies is not available.
Download this PDF file
VIEW ARTICLE
Statistic
Read Counter : 96 Download : 109

Downloads

Download data is not yet available.

Similar Articles

1 2 3 4 5 6 7 8 9 10 > >> 

You may also start an advanced similarity search for this article.