Research on the Relationship Between Financial Flexibility and Capital Structure Taking Chinese Listed Companies as Example

Abstract

The acceleration of global economic integration has led to an increasingly uncertain external environment for Chinese enterprises, which are therefore required to master financial flexibility and capital structure. These are two of the basic elements in the corporate financial decision-making field, and their mastery will enable enterprises to survive and develop in this environment. The objective of this paper is to examine the relationship between financial flexibility and capital structure and to explore the potential applications of this relationship in the context of Chinese listed companies. A sample of Chinese listed companies across various industries, spanning the period from 2011 to 2021, has been obtained from the CSMAR database and used to conduct a series of statistical analysis. The software Stata has been employed to perform benchmark regression analysis, heterogeneity testing, and robustness testing on endogenous variables associated with capital structure and financial flexibility in order to gain insight into their respective influences. The results of the charts demonstrate a significant impact of financial flexibility on capital structure. In particular, there is a significant positive impact on debt structure, while growth opportunities have a negative impact. This paper indicates that firms should utilise their debt structures in a rational and strategic manner, and adjust their growth opportunities to enhance their competitive edge.