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Paper Title: The Impact of Free Cash Flows on Firm’s Performance:
Evidence from Textile Sector of Pakistan
Abstract:
 
Free cash flows are the results of business activities. This study explores the association between free cash flows and financial performance of firms in order to improve the financial decision by management and investors. This study investigates the effect of free cash flow, sales growth and ownership concentration on the performance of Textile sector of Pakistan. Also, firm size and leverage are used as control variables. Firms owned by families always differ from public firms. The reason is the strong control of members of the same family in ownership, management and strategic control. Our findings provide a new perspective on the role of ownership concentration that it plays in corporate governance. The study presents empirical evidence by selecting a sample of 126 Textile sector companies over the time period of 2010-2014. Fixed effect regression model is used on Panel data. The Regression results indicate that free cash flows are positively associated with firm’s performance. While there is significant negative relation between ownership concentrations with firm’s performance, no significant relation exists between sales growth and firm’s performance whereas leverage negatively influences the firm’s performance. Free cash flows relating to the firm’s performance is a very useful for investors when evaluating a company as it provides understanding into capability of the company to fund its own progress and expansion. Free cash flow yields offer investors a better measure of performance than widely used P/E ratios. Free Cash Flows have very useful and important application for managers and shareholders of any corporation. Free cash flows also have significant role in most financial decisions. Cash flows available inside enable the corporate governance to operate with most efficient level and encourages or incorporates to make optimum decisions in operating, investing and financing context. This paper makes an effort to see the effect of free cash flows, sales growth and ownership concentration on firm’s performance in terms of Return on Assets (ROA).

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Dr Asfia Obaid
Conference Convener
Email:asfia.obaid@nbs.nust.edu.pk
Tel: 00-92-51-90853201

Mr Kashir Asghar
Conference Coordinator
Email:kashir.asghar@nbs.nust.edu.pk
Tel: 00-92-51-90853100

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