CXO

Financial Flexibility, Corporate Investment And Performance

Date Added: Jan 2011
Format: PDF

This paper examines the impact of financial flexibility on the investment and performance of 1,068 non-financial corporations that were significantly affected by the 1997-1998 Asian crisis. The authors find that firms can attain financial flexibility, primarily through conservative leverage policies and less commonly through large cash holdings. Their analysis shows that firms that are financially flexible prior to the crisis have a greater ability to take investment opportunities, rely much less on the availability of internal funds to invest, and perform better than less flexible firms during the crisis.