Published Paper Details:

Cash flow is the increase or decrease in the amount of money a business, organization, or individual has. Cash flow shows cash inflow and outflow in detail. The resulting Free Cash Flow often creates a disparity of interests between managers and investors. Managers want Free Cash Flow to be used for profitable investment plans to increase the remuneration received, while for investors Free Cash Flow is new funds that can be distributed as dividends. Therefore, problems will arise within the company which are usually referred to as agency problems. Conflicts of interest between the two parties will greatly influence the decisions taken by the company in Operating Performance. In managing their companies, managers more often put their own interests first, not the interests of the owners. This gives rise to initiatives for shareholders to design various governance tools in order to monitor managers and create confidence that the company will be managed according to the interests of investors (owners). Costs incurred due to the emergence of potential conflicts of interest are called agency costs. Agency Costs due to additional consumption and neglectful behavior and increases in Free Cash Flow resulting from internal operational efficiency, can result in better company performance. Free Cash Flow can provide companies with investment opportunities that will generate more value for the company which will increase Firm Value.