Abstract
Financial flexibility is an important research issue in corporate finance. This paper utilizes the Spatial Durbin Model (SDM) to analyze the impact of financial flexibility on the investment of Convention and Exhibition companies listed on the New Third Board from 2014 to 2016. The empirical results show the following. Firstly, the greater the financial flexibility, the more investment the firm will make. Secondly, the enhancement in financial flexibility would lead to an increase in investment of companies in the Convention and Exhibition industry in the local provinces, indicating that the financial flexibility has a significant positive intraregional spatial spillover effect on investment. On the other hand, financial flexibility has spatial spillover effects, and its rise will reduce the investment in other provinces, which could be explained by the competition effect between enterprises. Overall, we have further elucidated the role of different levels of financial flexibility on the investment of the Convention and Exhibition listed enterprises from the spatial dimension, thereby enriching the existing research on corporate financial flexibility and corporate value to some certain extent.
Highlights
According to the “China Convention and Exhibition industry’s capital market development report in 2016,” released by China Convention and Exhibition Society in the end of 2017, China’s Convention and Exhibition industry has experienced a rapid development with its growth rate reaching 11.1 percent, which is far higher than the GDP growth rate of 6.7 percent, and higher than the growth rate of 7.8% of the added value of other service industries
In theory of corporate finance, the key to effective use of funds lies in the financial flexibility of enterprises, which is closely related to the investment of enterprises
The short-term and longterm indirect effects of financial flexibility are significantly negative, implying that financial flexibility has spatial spillover effects, and its rise will reduce the investment in other cities, which could be explained by the competition effect between enterprises
Summary
According to the “China Convention and Exhibition industry’s capital market development report in 2016,” released by China Convention and Exhibition Society in the end of 2017, China’s Convention and Exhibition industry has experienced a rapid development with its growth rate reaching 11.1 percent, which is far higher than the GDP growth rate of 6.7 percent, and higher than the growth rate of 7.8% of the added value of other service industries. In order to enhance enterprise value, it is of strategic significance to quantify the impact of financial flexibility of Convention and Exhibition listed enterprises on investment by using an appropriate econometric model. As far as we know, there is no literature using this econometric empirical model to investigate the relationship between financial flexibility and investment in Convention and Exhibition enterprises. The Convention and Exhibition industry has its unique nature, exploring the internal relationship between financial flexibility and investment in this industry is beneficial for the Convention and Exhibition industry, which is relatively small in strength until now, to grasp investment opportunities and achieve stable development in an uncertain economy, and to enrich the research results of the overall capital market in this field.
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