London South Bank University

Department of Accounting and Finance
Faculty of Business
London South Bank University
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Impact of free cash flows and agency costs on firm performance
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Literature Review
MSc. International Accounting and Finance

02nd December 2014
(Word count circa excluding References)
Table of Contents
1. CONTEXT 4
1.1 INTRODUCTION 4
1.2 CRITICAL REVIEW OF THE LITERATURE 5
1.3 RESEARCH PHILOSOPHY – A GENERAL VIEW 6
1.3.1 Evaluation of philosophical implications underpinning the articles 6
1.3.2 The theoretical framework 6
1.3.3 Positive Accounting Theory 6
1.4 RESEARCH APPROACH – A GENERAL VIEW 7
1.4.1 Assessment of the research approach underpinning the articles 7
1.5 RESEARCH STRATEGIES – A GENERAL VIEW 7
1.5.1 An assessment of the research strategies employed 8
1.6 PRINCIPLE DEFINING FEATURES OF THE RESEARCH ARTICLES 8
This section briefly outlines the identified possible: 8
1.6.1 The possible aims of the reviewed articles 8
1.6.2 The possible objectives of the reviewed articles 9
1.6.3 The possible hypothesis of the reviewed articles 9
1.6.4 The possible research questions 10
2. LITERATURE REVIEW 10
2.1 EVALUTION OF THE KEY RESEARCH FINDINGS AND EVIDENCE TO SUPPORT THOSE FINDINGS 12
2.1.1 The sampling Technique 13
2.1.2 The data and related quality issues 14
2.1.3 Evaluation of the key research findings and evidence to support those findings 14
2.1.4 Reliability and Validity in quantitative research 16
Validity 16
Internal validity 16
External validity 16
Reliability 17
2.1.5 Biasness in data interpretation 17
2.1.6 Limitations of research 17
2.1.7 Ethical issues 17
2.2 CONCLUSION ON RESEARCH 18
2.3 FUTURE RESEARCH RECOMMENDATIONS 18

1. CONTEXT
The purpose of this literature review is to assess the relationship between free cash flows and agency costs on firm performance. The reason for addressing this phenomenon is that decisions relating to capital structure have always been substantial ones that companies confront and plays an important role in setting financial strategies for the company. This literature review also evaluates the theoretical framework on which the journals were based.

1.1 INTRODUCTION
Literature review will be based on the relationship between capital structure and firm performance. In so doing it will evaluate the work of the past researchers and will critically evaluate it and at the end of evaluation recommendation for future research work will be made. This literature review is mainly based on the four academic journals but it also includes other relevant articles as well. Following are the journals that have been used for this literature review. See appendices for hard copies of journal. The following journal articles are analysed in this literature review on the theme of capital structure of the firm:

Journal Review 1 (Appendix A)
The relationship between capital structure and firm performance: Evidence from Jordan by Khalaf Al-Taani
Journal Review 2 (Appendix B)
The effect of capital structure on profitability: an empirical analysis of listed firms in Ghana by Joshua Abor
Journal Review 3 (Appendix C)
Capital structure and financial performance: Evidence from selected business companies in Colombo Stock Exchange Sri Lanka by Puwanenthiren Pratheepkanth
Journal Review 4 (Appendix D)
Relationship between cost of capital and accounting criteria of corporate performance evaluation: Evidence from Tehran Stock Exchange: by Abbasali Pouraghajan, Naser Ail Yadollahzadeh Tabari, Aliakbar Ramezani, Elham Mansourinia, Milad Emamgholipour and Pejman Majd
1.2 CRITICAL REVIEW OF THE LITERATURE
This literature review will critically evaluate the above four journals from the research perspective and in so doing evaluate the systematic approach (or otherwise) of the four research articles. Thus, enabling an evaluation of the credibility of their findings/results based on the robustness of the research design.
This critical evaluation of the