Abstract
Through the analysis of empirical papers on financial flexibility over the years it can find that the impact of financial flexibility on corporate value shows a trend of increasing first and then decreasing, and there is an inflection point. Financial flexibility reserve is helpful to reduce the credit risk of the enterprise and help the enterprise to buffer under the environment of greater uncertainty. This buffer is more obvious when the financing constraint is greater. At the same time, this paper puts forward relevant suggestions on how to improve the financial flexibility of enterprises: increase the proportion of equity funds, increase capital reserves, and choose appropriate dividend policies.
Highlights
Introduction to Financial FlexibilityFinancial flexibility refers to the existence of variables and uncertainties in the operation of corporate capital and financial activities
Financial flexibility reserve is helpful to reduce the credit risk of the enterprise and help the enterprise to buffer under the environment of greater uncertainty
If there is a lack of financial flexibility reserves, it is likely that investment opportunities will be lost due to lack of funds
Summary
Financial flexibility refers to the existence of variables and uncertainties in the operation of corporate capital and financial activities. Based on this realistic background, corporate financial flexibility has been widely concerned and valued. From the perspective of capital flow, financial flexibility mainly involves the four aspects of financing, investment, operations and dividend distribution. Both the capital structure and the channels and methods of raising funds can have financial flexibility. Whether it is a project investment or a financial investment, the amount of investment and the frequency of the investment often affect the company’s use of funds and the financial flexibility of the company. This article will introduce the impact of financial flexibility on enterprises and make suggestions on how to improve financial flexibility
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