The Impact of Free Cash Flow in Investment Decisions and Dividend Payments: Evidence from Publicly-Listed Companies in the Philippine Stocks Exchange


  • Ronnel A. Ledesma


cash flow, investment decision, dividend payment


Managers decide on day-to-day operations. They always have the careful judgment if free cash flows could be invested on or upgrade fixed assets, such as equipment, acquire subsidiaries, payment of business for basic assets such as property, fixtures, machinery, or pay dividends to the stockholders. This study examined the impact of free cash flow on the investment decision and dividend payments of publicly-listed companies in the Philippine Stock Exchange. There were three variables associated in the study: a) free cash flow (independent variable); b) capital expenditure and c) dividend Payment (dependent variable). Necessary data were obtained from the audited financial statements of the publicly listed companies from the years 2013 to 2017. Quantitative method following a correlational research design was used to identify the strengths and direction of the variables’ relationship. Simple linear regression method was also utilized to examine the impact of free cash flow on investment decision and dividend payments. Results revealed that there was a moderately positive and significant relationship on the investment decision and weak with regards to dividend payments. As the level of free cash flow increases, capital expenditure also increases. Moreover, highlighted on the regression results that there was a positive impact on the free cash flows and investment decision. The study further recommends that there is a need to carry out another research incorporating other factors that will establish a relationship on free cash flow.