Do Free Cash Flow, Agency Cost, and COVID-19 Matter for Firm Performance? Evidence from Indonesia

This study explores how free cash flow, agency costs, and the COVID-19 pandemic affect firm performance, using the EGLS (Estimated Generalized Least Squares) method to analyze 148 selected equities over the period from 2011 to 2023. Results indicate that firm performance is significantly shaped by these variables. Specifically, free cash flow and lower agency costs enhance corporate performance, whereas the impact of COVID-19 is negative. The model's findings further show that a high asset turnover ratio, reflecting reduced agency costs, is linked to improved company performance, with agency costs also having a notable positive direct effect. These insights underline the importance of integrating free cash flow and agency cost considerations into managerial decision-making to optimize firm performance, as well as guiding investor strategies in the Indonesian stock market. Based on the study's findings, it is recommended that private business owners and policymakers prioritize efforts to increase free cash flow.