Free cash flow and investment precommitment

Detalhes bibliográficos
Autor(a) principal: Guedes, José Filipe Corrêa
Data de Publicação: 2000
Tipo de documento: Artigo
Idioma: eng
Título da fonte: Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)
Texto Completo: http://hdl.handle.net/10400.5/9921
Resumo: Theories of high leverage based on the argument that debt repayment forces management to disgorge free cash flow ignore the fact that firms' investment decisions often affect the investment decisions of competitors. This paper shows that when firms interact through their investment decisions, free cash flow in the hands of an investment-prone manager can serve as a strategic weapon. Endowing management with free cash flow precommits the firm to large, predatory investments, which keep rivals away from common investment opportunities. The focus on the precommitment value of free cash flow leads to a number of implications on cross-firm effects that are broadly consistent with existing evidence.
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spelling Free cash flow and investment precommitmentTheories of high leverage based on the argument that debt repayment forces management to disgorge free cash flow ignore the fact that firms' investment decisions often affect the investment decisions of competitors. This paper shows that when firms interact through their investment decisions, free cash flow in the hands of an investment-prone manager can serve as a strategic weapon. Endowing management with free cash flow precommits the firm to large, predatory investments, which keep rivals away from common investment opportunities. The focus on the precommitment value of free cash flow leads to a number of implications on cross-firm effects that are broadly consistent with existing evidence.Instituto Superior de Economia e GestãoRepositório da Universidade de LisboaGuedes, José Filipe Corrêa2015-10-28T14:23:40Z20002000-01-01T00:00:00Zinfo:eu-repo/semantics/publishedVersioninfo:eu-repo/semantics/articleapplication/pdfhttp://hdl.handle.net/10400.5/9921engGuedes, José Filipe Corrêa (2000). "Free cash flow and investment precommitment". Estudos de Gestão, V(1):3-22info:eu-repo/semantics/openAccessreponame:Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)instname:Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informaçãoinstacron:RCAAP2023-03-06T14:40:19Zoai:www.repository.utl.pt:10400.5/9921Portal AgregadorONGhttps://www.rcaap.pt/oai/openaireopendoar:71602024-03-19T16:56:30.047477Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) - Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informaçãofalse
dc.title.none.fl_str_mv Free cash flow and investment precommitment
title Free cash flow and investment precommitment
spellingShingle Free cash flow and investment precommitment
Guedes, José Filipe Corrêa
title_short Free cash flow and investment precommitment
title_full Free cash flow and investment precommitment
title_fullStr Free cash flow and investment precommitment
title_full_unstemmed Free cash flow and investment precommitment
title_sort Free cash flow and investment precommitment
author Guedes, José Filipe Corrêa
author_facet Guedes, José Filipe Corrêa
author_role author
dc.contributor.none.fl_str_mv Repositório da Universidade de Lisboa
dc.contributor.author.fl_str_mv Guedes, José Filipe Corrêa
description Theories of high leverage based on the argument that debt repayment forces management to disgorge free cash flow ignore the fact that firms' investment decisions often affect the investment decisions of competitors. This paper shows that when firms interact through their investment decisions, free cash flow in the hands of an investment-prone manager can serve as a strategic weapon. Endowing management with free cash flow precommits the firm to large, predatory investments, which keep rivals away from common investment opportunities. The focus on the precommitment value of free cash flow leads to a number of implications on cross-firm effects that are broadly consistent with existing evidence.
publishDate 2000
dc.date.none.fl_str_mv 2000
2000-01-01T00:00:00Z
2015-10-28T14:23:40Z
dc.type.status.fl_str_mv info:eu-repo/semantics/publishedVersion
dc.type.driver.fl_str_mv info:eu-repo/semantics/article
format article
status_str publishedVersion
dc.identifier.uri.fl_str_mv http://hdl.handle.net/10400.5/9921
url http://hdl.handle.net/10400.5/9921
dc.language.iso.fl_str_mv eng
language eng
dc.relation.none.fl_str_mv Guedes, José Filipe Corrêa (2000). "Free cash flow and investment precommitment". Estudos de Gestão, V(1):3-22
dc.rights.driver.fl_str_mv info:eu-repo/semantics/openAccess
eu_rights_str_mv openAccess
dc.format.none.fl_str_mv application/pdf
dc.publisher.none.fl_str_mv Instituto Superior de Economia e Gestão
publisher.none.fl_str_mv Instituto Superior de Economia e Gestão
dc.source.none.fl_str_mv reponame:Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)
instname:Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informação
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repository.name.fl_str_mv Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) - Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informação
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