How Does Financial Flexibility Strategy Impact on Risk Management Effectiveness?

Quang Khai Nguyen

MPRA Paper from University Library of Munich, Germany

Abstract: In the context of emerging countries trying to attract foreign investors, building governance strategies and risk management of firms is an increasing concern. This study investigates the impact of financial flexibility strategies on the risk management effectiveness of firms and mechanism of these impacts by focusing on Vietnamese listed firms by applying the fixed effect and system GMM methods on a sample of 635 Vietnamese listed firms during the 2010–2021 period to derive empirical models under the high risk-high return approach. We also applied robustness tests to ensure that the results are reliable. We also investigate the level of risk management effectiveness among these firms during the 2010–2021 period. We found that financial flexibility strategies negatively impact risk management effectiveness of firms through reducing both firm risk and firm performance. Furthermore, we found that the degree of risk management effectiveness differs between low- and high-risk firms in Vietnam, with low-risk firms displaying more effective risk management compared to high-risk firms. Our research shows that financial flexibility strategies are not conducive to risk management effectiveness; however, firms can control the impact of flexibility strategies on risk management by controlling firm performance and risk.

Keywords: financial flexibility; risk management effectiveness; listed firm; Vietnam (search for similar items in EconPapers)
JEL-codes: G13 G18 G3 (search for similar items in EconPapers)
Date: 2024-05-01
New Economics Papers: this item is included in nep-bec, nep-cfn, nep-cse, nep-rmg, nep-sbm, nep-sea and nep-tra
References: Add references at CitEc
Citations:

Published in Sage Open 14.2(2024): pp. 1-14

Downloads: (external link)
https://mpra.ub.uni-muenchen.de/121162/1/MPRA_paper_121162.pdf original version (application/pdf)

Related works:
Journal Article: How Does Financial Flexibility Strategy Impact on Risk Management Effectiveness? (2024)
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:pra:mprapa:121162

Access Statistics for this paper

More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter ().