The value of corporate financial flexibility in emerging countries

Kenneth Yung, DeQing Diane Li and Yi Jian

Journal of Multinational Financial Management, 2015, vol. 32-33, 25-41

Abstract: Using a sample of firms from 33 emerging countries, we find evidence that corporate financial flexibility enhances investment ability and reduces the sensitivity of investment to cash flow. In addition, financial flexibility reduces equity payout and increases cash holdings. The effects of financial flexibility on investment ability and financial policies are elevated during the global financial crisis of 2007–2009. Our results also show that financial flexibility adds to firm value, particularly during the financial crisis. Financially flexible firms suffer less from negative shocks. We find that financially flexible firms had smaller cutbacks in investment expenditures and equity payouts and suffered less in operating performance than never financially flexible firms during the global financial crisis.

Keywords: Financial flexibility; Unused debt capacity; Financial crisis; Sensitivity of investment to cash flow; Firm value; Equity payout (search for similar items in EconPapers)
JEL-codes: F30 G30 G32 G35 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (14)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1042444X15300037
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:mulfin:v:32-33:y:2015:i::p:25-41

DOI: 10.1016/j.mulfin.2015.07.001

Access Statistics for this article

Journal of Multinational Financial Management is currently edited by I. Mathur and G. G. Booth

More articles in Journal of Multinational Financial Management from Elsevier
Bibliographic data for series maintained by Catherine Liu ().