The impact of free cash flows, board independence, and the focus of institutional ownership on the level of corporate investment

According to the theory of free cash flow representation, when free cash flows increase, managers are encouraged to invest in projects with negative returns. The corporate governance is used to monitor the company's use of free cash flow to ensure that only projects with a net present positive value are implemented. The purpose of this study is to investigate the effect of free cash flows, board independence and the focus of corporate institutional ownership on the level of investment of companies listed on the Tehran Stock Exchange. In this regard, 110 companies were selected by elimination sampling method for the period 2010-2016. The combined data method was used to test the research hypotheses. The results show that free cash flows have a positive and significant effect on the level of investment, while the independence of the board of directors and the focus on institutional ownership have a negative and significant impact on investment. Therefore, increasing the ownership of family members of the board as a control mechanism can reduce managers' excessive access to free cash flows.