The Effect of Free Cash Flow on Firm Value with the Moderating Role of Dividend Policy (An Empirical Study on a Sample Industrial Companies Listed in Arab Gulf Markets)
Keywords:
Firm Value, Free Cash Flow, Dividend Policy.Abstract
The objective of the study is to determine the impact of free cash flow on firm value and the moderating effect of dividend policy. The application was conducted on 55 industrial companies listed in Gulf financial markets during 2019-2023. Data were collected from the published financial reports of companies under study, and analyzed using Eviews 13.
firm value was examined as a dependent variable, measured by the Price-to-Book Value (PBV) ratio. Free cash flow was used as an independent variable, measured by the ratio of the difference between operating activities and capital expenditures to total assets. Dividend policy was treated as a moderating variable, measured by the (DPR) ratio.
The results revealed that free cash flow has a significant and positive impact on the value of industrial companies listed in Gulf Arab market. In contrast, dividend policy showed no significant effect – either directly or through its interaction with free cash flow, indicating its limited role in influencing firm value within examined sample. This highlights the need to focus on more impactful financial indicators.
