The Investigate of the Relation in the Free Cash Flow Valuation and Stock Returns and Annual Adjustment between Growth Opportunities

Abstract

The free cash flow is a criterion for measurement of firm performance and shows cash that company possesses after performing the necessary expenses for the maintenance or development of assets. Free cash flow is important from this aspect which allows the company to seek opportunities and increase shareholder value. Without having the cash, Development of new products, doing commercial Acquisition, paying Cash benefits to shareholders and debts relief is not possible. Given the importance of this issue, has been attempted in this research, we investigate the relation between growth opportunities in the free cash flow valuation and stock returns and annual adjustment. 120 companies among the listed companies in Tehran Stock Exchange were studied in a 5-year period from 1387 to 1391. This research in terms of purpose is a part of applied research and was evaluated to correlation method. The results of this study show that there is a significant and positive relation between growth opportunities and free cash flow. Also, there is a positive and significant relation between growth opportunities and stock returns and finally, there is a positive and significant relation between growth opportunities and annual adjustment.