Abstract:
Free cash flow (FCF) is a measure of the company's financial performance and allows the company to pursue opportunities that increase shareholder value. This research aims to determine the influence of free cash flow toward agency cost and financial performance. This test uses a linear regression of 72 companies listed on LQ45 IDX Indonesia Stock Exchange during the year 2013-2016.
The results of this research indicate that free cash flow significantly influence on agency cost using proxy asset turn over and administration ratio. This proves the existence of free cash flow within the company will increase the incentive management to use it on personal interests. On the other hand, free cash flow has no significant effect on financial performance.
