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Agency costs and accounting quality within an all-equity setting: the role of free cash flows and growth opportunities
| Title: | Agency costs and accounting quality within an all-equity setting: the role of free cash flows and growth opportunities. |
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| Name(s): |
Cabán, David, author Kohlbeck, Mark, Thesis advisor Florida Atlantic University, Degree grantor College of Business School of Accounting |
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| Type of Resource: | text | |
| Genre: | Electronic Thesis Or Dissertation | |
| Date Created: | 2015 | |
| Date Issued: | 2015 | |
| Publisher: | Florida Atlantic University | |
| Place of Publication: | Boca Raton, Fla. | |
| Physical Form: | application/pdf | |
| Extent: | 99 p. | |
| Language(s): | English | |
| Summary: | I investigate if all-equity firms are a heterogeneous group as it relates to agency costs and accounting quality. All-equity firms are a unique group of firms that choose a “corner solution” as their capital structure. Extant research, supported by well-established theories such as trade-off theory, free cash flow theory, and Jensen’s (1986) control hypothesis, generally conclude that agency conflicts motivate such structure. Research also supports the alternative argument that poor accounting quality makes debt so prohibitive that such firms are driven to this capital structure. I propose that an all-equity structure is not necessarily symptomatic of agency conflicts and poor accounting quality overall. I investigate if different motivations, within an all-equity setting, reflected by free cash flows and growth opportunities, result in different levels of agency cost and accounting quality. By anchoring on theories that link implicit costs of debt to free cash flow levels and growth opportunities, I hypothesize that free cash flows and growth opportunities are strongly linked to the justification or lack thereof for the pursuit of such strategy. I hypothesize and show that firms in the extremes of the free cash flow to growth rate spectrum exhibit significantly different levels of agency cost and accounting quality within the all-equity setting. These results support my main prediction that there exists agency costs and accounting quality differences within the all-equity setting which are associated with free cash flow levels and growth opportunities and that the pessimistic conclusions for pursuing an all-equity strategy reached by prior research should not be generalized to all such firms. | |
| Identifier: | FA00004432 (IID) | |
| Degree granted: | Dissertation (Ph.D.)--Florida Atlantic University, 2015 | |
| Collection: | FAU Electronic Theses and Dissertations Collection | |
| Note(s): | Includes bibliography. | |
| Subject(s): |
Business enterprises -- Valuation Cash management Corporations -- Finance Corporations -- Growth Financial risk management Strategic planning Venture capital |
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| Held by: | Florida Atlantic University Libraries | |
| Sublocation: | Digital Library | |
| Links: | http://purl.flvc.org/fau/fd/FA00004432 | |
| Persistent Link to This Record: | http://purl.flvc.org/fau/fd/FA00004432 | |
| Use and Reproduction: | Copyright © is held by the author, with permission granted to Florida Atlantic University to digitize, archive and distribute this item for non-profit research and educational purposes. Any reuse of this item in excess of fair use or other copyright exemptions requires permission of the copyright holder. | |
| Use and Reproduction: | http://rightsstatements.org/vocab/InC/1.0/ | |
| Host Institution: | FAU | |
| Is Part of Series: | Florida Atlantic University Digital Library Collections. |
