THE MODERATING EFFECT OF OWNERSHIP STRUCTURE ON THE RELATIONSHIP BETWEEN FREE CASH FLOW AND ASSET UTILIZATION

Abstract

The primary purpose of this study is to determine the relationship between FCF and asset utilization and figure out the moderating impact of different ownership structures on the relationship between these variables. Three types of ownership structure employed, namely government ownership, managerial ownership, and foreign ownership. The data is cross-sectional over the period 2012-2016. The data has been taken from the financial reports of selected PSX-100 index-listed firms. The research study's findings reveal an insignificant yet negative association between asset utilization and free cash flows. The study further specifies that the free cash flows may be spent fruitlessly, leading to the inefficient utilization of assets. The study also found that managerial and foreign ownership structures are better tools to check and monitor asset utilization in companies with a higher percentage of free cash flows than companies with a lower percentage of free cash flows. The study has contributed to understanding the different types of ownership structures in overseeing the usage of a firm’s assets.