Recent studies of the relative size of corporate and industry effects have used ANOVA, Variance Components Analysis and Simultaneous Equations (Roquebert, Philips and Westfall 1996; McGahan and Porter, 1997a; 1997b, Brush, Bromiley and Hendrikx, forthcoming). This paper provides a comprehensive...

The paper investigates the agency argument that sales growth in firms with free cash flow (and without strong governance) is less profitable than sales growth for firms without free cash flow. It also tests whether strong governance conditions improve the performance of firms with free cash flow...