The Relationship between Free Cash Flow and Over Investment with Cash Dividend

Abstract

This paper studies the relationship between free cash flow and over investment with cash dividend. With regard to time and place of research, the statistical sample consisted of 73 listed companies in Tehran Stock Exchange from 3/20/2007 to 3/19/2013. For analyzing the effects of research variables on each other, free cash flow and over investment were considered as independent variables and cash dividend was considered as a dependent variable. The relationships between these variables were then analyzed. Next, four hypotheses were posed and the required data was collected. In order to analyze the collected data, multiple linear regression analysis was used. It was revealed that there is a significant correlation between free cash flow and cash dividend, over investment and cash dividend, and finally over investment and cash dividend in the companies with high free cash flows. There was no significant correlation between over investment and cash dividend in companies with low free cash flows.