The objective of this study is to empirically identify which accounting definition of free cash flow (FCF) is the most value relevant for the financial institutions sector (FIS). This study aims to provide two contributions to the literature: First, the results would help investors make better decisions, and second, the results may encourage the Financial Accounting Standards Board (FASB) to require FIS companies to use a specific definition of FCF. Using correlations and multiple regression analysis on a sample of 11,662 observations covering the 25-year period from 1988 to 2012, the author empirically shows that the FCF that has the most significant association with stock price changes, after controlling for many factors that may affect stock prices, is the one defined as cash flow from operations less cash flow for investing activities less cash outflow for preferred stock dividends. The author recommends that the FASB require FIS companies to disclose that FCF in the body of the Statement of Cash Flows or at its bottom together with the cash outflow for income taxes and interest expense. Short of that, the FASB should at least require FIS companies that voluntarily disclose FCF to use only the FCF definition identified by this study.