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Article: The value of financial flexibility and corporate financial policy

TitleThe value of financial flexibility and corporate financial policy
Authors
KeywordsPayout policy
Capital structure
Cash holdings
Financial flexibility
Issue Date2014
Citation
Journal of Corporate Finance, 2014, v. 29, p. 288-302 How to Cite?
Abstract© 2014 Elsevier B.V. We propose a novel approach to measure the value that shareholders assign to financial flexibility. In contrast to existing proxies for financial constraints, our measure is market-based, forward-looking and not directly influenced by past financial decisions. We find that firms for which shareholders consider financial flexibility more valuable have lower dividend payouts, prefer share repurchases to dividends, and exhibit lower leverage ratios. Moreover, these firms tend to accumulate more cash. Our analysis contributes to the growing literature on financial flexibility and indicates that-in line with prior survey evidence-financial flexibility considerations shape corporate financial policy.
Persistent Identifierhttp://hdl.handle.net/10722/210136
ISSN
2015 Impact Factor: 1.286
2015 SCImago Journal Rankings: 1.446

 

DC FieldValueLanguage
dc.contributor.authorRapp, Marc Steffen-
dc.contributor.authorSchmid, Thomas-
dc.contributor.authorUrban, Daniel-
dc.date.accessioned2015-05-22T06:06:44Z-
dc.date.available2015-05-22T06:06:44Z-
dc.date.issued2014-
dc.identifier.citationJournal of Corporate Finance, 2014, v. 29, p. 288-302-
dc.identifier.issn0929-1199-
dc.identifier.urihttp://hdl.handle.net/10722/210136-
dc.description.abstract© 2014 Elsevier B.V. We propose a novel approach to measure the value that shareholders assign to financial flexibility. In contrast to existing proxies for financial constraints, our measure is market-based, forward-looking and not directly influenced by past financial decisions. We find that firms for which shareholders consider financial flexibility more valuable have lower dividend payouts, prefer share repurchases to dividends, and exhibit lower leverage ratios. Moreover, these firms tend to accumulate more cash. Our analysis contributes to the growing literature on financial flexibility and indicates that-in line with prior survey evidence-financial flexibility considerations shape corporate financial policy.-
dc.languageeng-
dc.relation.ispartofJournal of Corporate Finance-
dc.subjectPayout policy-
dc.subjectCapital structure-
dc.subjectCash holdings-
dc.subjectFinancial flexibility-
dc.titleThe value of financial flexibility and corporate financial policy-
dc.typeArticle-
dc.description.natureLink_to_subscribed_fulltext-
dc.identifier.doi10.1016/j.jcorpfin.2014.08.004-
dc.identifier.scopuseid_2-s2.0-84908419799-
dc.identifier.volume29-
dc.identifier.spage288-
dc.identifier.epage302-

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