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Nnenna Georgina Nwonye
Department of Banking and Finance, University of Nigeria, Enugu Campus
Decision Sciences, Operations Research & Management

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Testing the validity of free cash flow hypothesis: Evidence from Nigeria Nnenna Georgina Nwonye; Sebastine Ugochukwu Ugwuegbe
International Journal of Financial, Accounting, and Management Vol. 1 No. 3 (2019): December
Publisher : Goodwood Publishing

Show Abstract | Download Original | Original Source | Check in Google Scholar | DOI: 10.35912/ijfam.v1i3.123

Abstract

Purpose: This study empirically tests the validity of the free cash flow hypothesis among firms quoted on the Nigerian Stock Exchange (NSE) from 2007 to 2017. Research methodology: The study employed a dynamic panel system Generalized Method of Moments (GMM) in analyzing the data generated. Results: the result failed to provide empirical evidence in support of the Jensen free cash flow hypothesis in Nigeria. The equally showed that a high concentration of shareholding in the hand of a few individual increases the amount of dividend paid out to shareholders. The result is however robust using different methods. Limitations: We focused only on testing the validity of the free cash flow hypothesis proposed by Jensen (1986). Contribution: The study provided empirical evidence that invalidates the propositions of the free cash flow hypothesis among publicly quoted firms in Nigeria. The result is robust using different estimation techniques. Keywords: Free cash flow hypothesis; Dividend payout
Co-Authors Sebastine Ugochukwu Ugwuegbe