This study provides view of free cash flow and corporate governance by addressing the relationship
between audit committee characteristics with free cash flow. Specifically, this study explores whether audit
committee characteristics are substitutes to control agency problem regarding free cash flow within Malaysian
firms. The data set comprise of observations from 200 Malaysian companies for four consecutive years, 2005-
2008. The results show that size of audit committee, frequency of audit committee meeting, proportion of audit
committee independence is positively associated with level of free cash flow. The results of study highlight the
importance of corporate governance mechanism, in the form of audit committee characteristics, in the
management of cash flow.