Investigating the effect of financial flexibility on corporate' risk taking with the moderating role of investment efficiency
Subject Areas : Role of accounting in capital market efficiency and Informativeness
abdolrasol mostajeran
1
*
,
samane eftekhari
2
,
tahere sajadi rad
3
1 - Faculty Member, Faculty of Financial Sciences, Kharazmi University, Tehran, Iran
2 - PhD student, South Tehran Azad University, Tehran, Iran
3 - PhD student, South Tehran Azad University, Tehran, Iran
Keywords: Financial flexibility, firms’ risk-taking, investment efficiency, emerging markets,
Abstract :
Abstract
In recent years, the concept of financial flexibility has gained attention as a key factor in the strategic decision-making of firms, especially in developing economies. On one hand, given the rapid economic growth and dynamic changes in financial environments, the risk-taking ability of firms is considered a vital factor for their growth and development. Therefore, this research examines whether financial flexibility can act as a driver of corporate risk-taking. Additionally, the moderating role of investment efficiency in this relationship has also been investigated. To this end, a quantitative empirical approach based on multivariate regression analysis was employed, utilizing data collected from 153 firms listed on the Tehran Stock Exchange during the years 2013 to 2023, analyzed using the dynamic panel econometric technique (GMM) and EViews software. The results indicated that with an increase in financial flexibility, the risk-taking of firms also increases, suggesting that financial flexibility can serve as a strategic resource, enabling firms to make riskier decisions by providing sufficient financial resources. Furthermore, the role of investment efficiency as a moderating factor in this relationship was confirmed, revealing that investment efficiency enhances the positive impact of financial flexibility on risk-taking. These findings provide valuable insights for managers and investors and emphasize the importance of financial flexibility for risk-taking in Iranian firms.
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