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

Apreda, Rodolfo, Who is the Ultimate Master of Contractual, Regulatory, Discretionary and Residual Cash Flows? An Answer from the Standpoint of Corporate Governance (February 2008). Universidad del CEMA Working Paper No. 368, Available at SSRN: https://ssrn.com/abstract=1096242 or http://dx.doi.org/10.2139/ssrn.1096242

Universidad del CEMA (Contact Author)

Universidad del CEMA - Department of Economics ( email )

Buenos Aires
Argentina
5411 6314-3000 (Phone)
5411 4314-1654 (Fax)

HOME PAGE: http://www.cema.edu.ar/publicaciones/jae.html

Rodolfo Apreda

University of CEMA ( email )

Department of Finance Room 612
Buenos Aires, C1054AAP
Argentina
5411 6314 3000 (Phone)
5411 4803 0429 (Fax)

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