Who is the ultimate master of contractual, regulatory, discretionary and residual cash flows? An answer from the standpoint of corporate governance
AbstractThis paper sets forth a framework of analysis that links contractual, discretionary, regulatory and residual cash flows with decision rights over them. To attain this purpose, firstly we introduce the standard incremental cash flow model, underlying its main limitations. Secondly, we move on bringing to light cash flows to senior management and directors, as well as the so-often neglected investment portfolio. Next, we settle down to what we are going to call the compact cash flow model that comprises five building blocks, namely those arising out of assets, those addressed to owners, creditors, managers and directors, and lastly the company’s investment portfolio. Afterwards, contractual, discretionary, regulatory and residual cash flows are enlarged upon. Last of all, we focus on decision rights over every constituent of each building block. This issue carries weight in Corporate Governance since stakeholders who claim or exercise decision rights, also could trespass on the rules of the game, becoming better off to the expense and damage of other stakeholders.
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Bibliographic InfoPaper provided by Universidad del CEMA in its series CEMA Working Papers: Serie Documentos de Trabajo. with number 368.
Length: 26 pages
Date of creation: Feb 2008
Date of revision:
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More information through EDIRC
corporate governance; contractual; regulatory; discretional and residual cash flows; decision rights; incremental cash flow model;
Find related papers by JEL classification:
- G30 - Financial Economics - - Corporate Finance and Governance - - - General
- G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
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