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The Free Cash Flow Anomaly Revisited: Finnish Evidence

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  • Annukka Jokipii
  • Sami Vähämaa

Abstract

This paper examines the performance of an investment strategy based on free cash flows using financial statement data of Finnish companies during the period 1992‐2002. The analysis in this paper is motivated by the so‐called free cash flow anomaly previously documented e.g. in Hackel, Livnat and Rai (2000). Using annual financial statement information, we identify large‐capitalization companies with positive free cash flows, low free cash flow multiples, and low financial leverage. Since a portfolio of these companies is found to consistently outperform the market index, our results suggest that the free cash flow anomaly also exists in the Finnish stock market.

Suggested Citation

  • Annukka Jokipii & Sami Vähämaa, 2006. "The Free Cash Flow Anomaly Revisited: Finnish Evidence," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 33(7‐8), pages 961-978, September.
    • Handle: RePEc:bla:jbfnac:v:33:y:2006:i:7-8:p:961-978
    DOI: 10.1111/j.1468-5957.2006.00620.x
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    2. Martins, Izaias & Rialp, Alex, 2013. "Orientación emprendedora, hostilidad del entorno y la rentabilidad de la Pyme: una propuesta de contingencias," Cuadernos de Gestión, Universidad del País Vasco - Instituto de Economía Aplicada a la Empresa (IEAE).

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