{"title":"The influence of financial flexibility on firm performance: the moderating effects of investment efficiency and investment scale","authors":"Wei Wu, Chau Le, Yulu Shi, Fadi Alkaraan","doi":"10.1108/jaar-07-2023-0192","DOIUrl":null,"url":null,"abstract":"<h3>Purpose</h3>\n<p>Financial flexibility and investment efficiency are of vital importance in strategic choices at boardrooms, particularly in post-crisis recovery strategies. This study examines the moderating effects of investment efficiency and investment scale on the relationship between financial flexibility and firm performance.</p><!--/ Abstract__block -->\n<h3>Design/methodology/approach</h3>\n<p>The authors use sample of 10,755 US-listed firms over the period 2010–2021 to examine the relationships between investment scale, investment efficiency, financial flexibility and firm performance. Particular attention is paid to overinvestment and underinvestment.</p><!--/ Abstract__block -->\n<h3>Findings</h3>\n<p>Findings of this study reveal that financial flexibility mitigates investment inefficiency through reducing overinvestment. Financial flexibility contributes to boost a firm’s accounting and market performance. Additionally, investment efficiency and investment scale have moderating effects on the relationship between financial flexibility and firm performance. However, the influence of investment efficiency is greater than the influence of investment scale. Finally, the authors find that the direct and indirect effects of financial flexibility are stronger on market performance than accounting performance, implying that market is more sensitive to corporate financial policies.</p><!--/ Abstract__block -->\n<h3>Research limitations/implications</h3>\n<p>Findings of this study have implications for scholars, decision-makers policymakers, investors and other stakeholders.</p><!--/ Abstract__block -->\n<h3>Practical implications</h3>\n<p>This study has its own limitations due to the sample selection issues, country context and the research model adopted by this study.</p><!--/ Abstract__block -->\n<h3>Originality/value</h3>\n<p>The novel contribution to the extant literature is incorporating the influence of investment scale and investment efficiency into the relationship between financial flexibility and firm performance.</p><!--/ Abstract__block -->","PeriodicalId":46321,"journal":{"name":"Journal of Applied Accounting Research","volume":null,"pages":null},"PeriodicalIF":3.9000,"publicationDate":"2024-03-12","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Journal of Applied Accounting Research","FirstCategoryId":"1085","ListUrlMain":"https://doi.org/10.1108/jaar-07-2023-0192","RegionNum":0,"RegionCategory":null,"ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q1","JCRName":"BUSINESS, FINANCE","Score":null,"Total":0}
引用次数: 0
Abstract
Purpose
Financial flexibility and investment efficiency are of vital importance in strategic choices at boardrooms, particularly in post-crisis recovery strategies. This study examines the moderating effects of investment efficiency and investment scale on the relationship between financial flexibility and firm performance.
Design/methodology/approach
The authors use sample of 10,755 US-listed firms over the period 2010–2021 to examine the relationships between investment scale, investment efficiency, financial flexibility and firm performance. Particular attention is paid to overinvestment and underinvestment.
Findings
Findings of this study reveal that financial flexibility mitigates investment inefficiency through reducing overinvestment. Financial flexibility contributes to boost a firm’s accounting and market performance. Additionally, investment efficiency and investment scale have moderating effects on the relationship between financial flexibility and firm performance. However, the influence of investment efficiency is greater than the influence of investment scale. Finally, the authors find that the direct and indirect effects of financial flexibility are stronger on market performance than accounting performance, implying that market is more sensitive to corporate financial policies.
Research limitations/implications
Findings of this study have implications for scholars, decision-makers policymakers, investors and other stakeholders.
Practical implications
This study has its own limitations due to the sample selection issues, country context and the research model adopted by this study.
Originality/value
The novel contribution to the extant literature is incorporating the influence of investment scale and investment efficiency into the relationship between financial flexibility and firm performance.
期刊介绍：
The Journal of Applied Accounting Research provides a forum for the publication of high quality manuscripts concerning issues relevant to the practice of accounting in a wide variety of contexts. The journal seeks to promote a research agenda that allows academics and practitioners to work together to provide sustainable outcomes in a practice setting. The journal is keen to encourage academic research articles which develop a forum for the discussion of real, practical problems and provide the expertise to allow solutions to these problems to be formed, while also contributing to our theoretical understanding of such issues.
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