Financial Flexibility and Corporate Investment: Does Financial Flexibility Affect Sustainability of Firms?

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Author(s): Seda Bilyay Erdoğan (Boğaziçi University, Turkey)
Copyright: 2019
Pages: 16
Source title: The Circular Economy and Its Implications on Sustainability and the Green Supply Chain
Source Author(s)/Editor(s): Ulas Akkucuk (Uşak University)
DOI: 10.4018/978-1-5225-8109-3.ch013

Keywords: Business & Management / Business Science Reference / Economics and Economic Theory / Supply Chain Management

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Abstract

This chapter investigates the impact of financial flexibility (FF) on investments, which constitutes the basis for sustainable corporate development. Using a large database of 1,205 firms from three emerging countries in Europe—Poland, Russia and Turkey—for the time period between 2000 and 2016. The authors provide evidence that financial flexibility, achieved through conservative leverage policies, enhances companies' investments and positively contribute to corporate sustainability. Moreover, as the number of years of low leverage kept by firms increase so does the impact of financial flexibility on corporate investment. Besides financial flexibility, internal cash generation capacity of firms, and sales growth also improve the investment capability of firms, improving corporate sustainability. The results support the hypothesis that financial flexibility enhances companies' investment capability, which is an extremely essential tool for firms to have in their businesses.

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Financial Flexibility and Corporate Investment: Does Financial Flexibility Affect Sustainability of Firms?

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