Who is the Ultimate Master of Contractual, Regulatory, Discretionary and Residual Cash Flows? An Answer from the Standpoint of Corporate Governance
Universidad del CEMA Working Paper No. 368
26 Pages Posted: 21 Feb 2008
Date Written: February 2008
Abstract
This paper sets forth a framework of analysis that links contractual, discretionary, regulatory and residual cash flows with decision rights over them. To attain this purpose, firstly we introduce the standard incremental cash flow model, underlying its main limitations. Secondly, we move on bringing to light cash flows to senior management and directors, as well as the so-often neglected investment portfolio. Next, we settle down to what we are going to call the compact cash flow model that comprises five building blocks, namely those arising out of assets, those addressed to owners, creditors, managers and directors, and lastly the company's investment portfolio. Afterwards, contractual, discretionary, regulatory and residual cash flows are enlarged upon. Last of all, we focus on decision rights over every constituent of each building block. This issue carries weight in Corporate Governance since stakeholders who claim or exercise decision rights, also could trespass on the rules of the game, becoming better off to the expense and damage of other stakeholders.
Keywords: corporate governance, contractual, regulatory, discretional and residual cash flows, decision rights, incremental cash flow model
JEL Classification: G30, G34
Suggested Citation: Suggested Citation
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