The Effect of Managerial Entrenchment on the Relationship between Free Cash Flow and Financial Performance on the Egyptian Listed Companies: An Empirical Study | ||||
| مجلة البحوث التجارية | ||||
| Article 25, Volume 46, Issue 3, July 2024, Page 38-71 PDF (535.36 K) | ||||
| Document Type: تجاریة کل ما یتعلق بالعلوم التجاریة | ||||
| DOI: 10.21608/zcom.2023.178650.1194 | ||||
 View on SCiNiTO | ||||
| Authors | ||||
خلود محمد سليم  1; نعيم فهيم حنا2; سيد سالم محمد أبو سالم2
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| 1قسم المحاسبة, كلية التجارة, جامعة الزقازيق, مصر | ||||
| 2قسم المحاسبة، کلية التجارة، جامعة الزقازيق، مصر | ||||
| Abstract | ||||
| The purpose of this paper is to investigate the effect of managerial entrenchment on the relationship between free cash flow and financial performance by answering the following question: what is the effect of managerial entrenchment on the relationship between free cash flow and financial performance of the listed companies in Egypt? This is considering both the Agency and Stewardship theories. The researcher depends on managerial entrenchment index as a measure of managerial entrenchment consisting of five mechanisms of managerial entrenchment (Independence of the board of directors, chief executive officer duality, chief executive officer tenure, managerial ownership, financial leverage. The researcher uses free cash flow index depending on the following equation ((operating cash flow – capital expenditures)/ book value of total assets at the end of the year). The researcher depends on Tobin Q ratio and return on equity ratio as a measure of financial performance. This study depends on a sample of non-financial companies over the period from 2014 to 2019, with 522 firm-year observations. The results of multiple regression analysis show that there is a positive relationship between the interaction of free cash flow and managerial entrenchment and financial performance. These results highlight the importance of assurances of stewardship theory that it is not necessary to present managerial entrenchment as it is against the interests of stockholders and the effectiveness of organizations. Entrenchment could be useful if it is able to create value for the company which reflects positively on the wealth of its stockholders. | ||||
| Keywords | ||||
| Managerial Entrenchment; Free Cash Flow; Financial Performance; Tobin Q Ratio; Return on Equity Ratio | ||||
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