No / This study examines the impact of financial flexibility on the investment and
performance of East Asian firms over the period 1994–2009. We employ a sample of 1,068
firms and place particular emphasis on the periods of the Asian crisis (1997–1998) and the
recent credit crisis (2007–2009). The results show that firms can attain financial flexibility,
primarily through conservative leverage policies and less commonly by holding large cash
balances. Financial flexibility appears to be an important determinant of investment and
performance, mainly during the Asian 1997–1998 crisis. In particular, firms that are
financially flexible prior to this crisis (1) have a greater ability to take investment
opportunities, (2) rely much less on the availability of internal funds to invest, and
(3) perform better than less flexible firms during the crisis. Our analysis covering the credit
crisis period of 2007–2009 suggests that some of the advantages of flexible firms towards
investing persist but are significantly less pronounced over that period. We also find that
the value of financial flexibility is region/country specific, which may be explained by the
fact that different regions/countries often adopt different macroeconomic policies and
operate in diverse economic/legal environments.
| Identifer | oai:union.ndltd.org:BRADFORD/oai:bradscholars.brad.ac.uk:10454/11461 |
| Date | 01 March 2013 |
| Creators | Arslan-Ayaydin, O., Florackis, C., Ozkan, Aydin |
| Source Sets | Bradford Scholars |
| Language | English |
| Detected Language | English |
| Type | Article, No full-text in the repository |
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