Home|Journals|Articles by Year|Audio Abstracts RSS - TOC

Original Research

EJMS. 2000; 5(1): 3-22


Jose Filipe Correa Guedes.


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.

Full-text options

Share this Article

Online Article Submission
• ejmanager.com

ejPort - eJManager.com
Review(er)s Central
About BiblioMed
License Information
Terms & Conditions
Privacy Policy
Contact Us

The articles in Bibliomed are open access articles licensed under the terms of the Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License (https://creativecommons.org/licenses/by-nc-sa/4.0/) which permits unrestricted, non-commercial use, distribution and reproduction in any medium, provided the work is properly cited.