EVIDENCE ON THE MONITORING ROLE OF MANAGERIAL OWNERSHIP IN MODERATING THE RELATIONSHIP BETWEEN FREE CASH FLOW AND ASSETS EFFICIENCY

This study investigated the moderation effect of managerial ownership on the relationship between free cash flow and assetsefficiencyin Tehran Stock Exchange over the period 2008-2012. The results showed that there is a significant and negative relationship between free cash flow and asset efficiency. It means that in those firms which have a high level of free cash flow, managers are opportunists. Therefore, it caused to decrease in asset efficiencyand increase in agency costs. The evidence demonstrated that managerial ownership has a meaningful moderating effect on the negative relationship between free cash flow and asset efficiency; it means that managerial ownership provides monitoring on the use of the firms' assets. Those firms which have a high level of free cash flow and high level of managerial ownership, have experienced high level of asset efficiencyand low level of agency costs.