The Impact of Free Cash Flow and Growth Opportunity on Disclosure Quality and Stock Return Synchronicity

• Main Authors: mohammadali aghaii, saeed sirghani, saleh orfizadeh
• Format: Article
• Language: fas
• Published: Alzahra University 2017-10-01
• Series: پژوهش‌های تجربی حسابداری
• Subjects: Jensen's free cash flow problem; disclosure quality; stock return synchronicity
• Online Access: http://jera.alzahra.ac.ir/article_2943_f0340b78d203b2ca6df192260e6281cc.pdf

This paper is aimed to investigate whether Jensen's free cash flow problem increases stock return synchronicity or not. Based on the previous studies, this is expected that low-growth firms with high free cash flow increase stock return synchronicity by decreasing disclosure quality. This research examines the hypotheses using two Tobit regression models. The sample consists of 112 firms listed in Tehran Stock Exchange during the period from 2007/3/20 to 2015/3/20. The research findings show that free cash flow and growth opportunities respectively have significant negative and significant positive effects on disclosure quality and also they respectively have significant positive and significant negative effects on stock return synchronicity. Accordingly, in low-growth firms with high free cash flow, disclosure quality is lower and stock return synchronicity is higher and the findings of the previous studies are supported. In other words, this can be resulted that Jensen's free cash flow problem increases stock return synchronicity.