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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.

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 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.

Findings of this study have implications for scholars, decision-makers policymakers, investors and other stakeholders.

This study has its own limitations due to the sample selection issues, country context and the research model adopted by this study.

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.

The objective of this study is to test whether financial flexibility has value. Using the current financial crisis, the authors investigate whether firms that built up financial flexibility over the years preceding the crisis yield superior performance during the financial crisis.

Financial flexibility is measured along the following dimensions: cash and cash equivalents, debt (short‐term and total) and net debt. These proxies are measured as an average over the five years prior to the crisis, from September 2002 to August 2007. Firms are then sorted into ten portfolios and monthly stock returns for each portfolio are evaluated over the crisis period from September 2007 to March 2010.

The authors' results show that high pre‐crisis levels of cash do not seem to have a positive impact on firm value during the crisis. However, the results provide evidence that high pre‐crisis levels of debt had a negative impact on firm value during the latest financial crisis, supporting the hypothesis that financial flexibility has value.

The originality of the authors' approach is to evaluate the value of financial flexibility during a financial crisis. The recent financial crisis offers an ideal test case to evaluate whether financial flexibility has indeed value for the firm.

This study examined the attainment and the benefits of financial flexibility in the presence of concentrated ownership in the Caribbean.

This study used qualitative methodology via the use of case studies.

Results revealed that liquidity may be considered the most important form of financial flexibility for firms in transitioning economies, due to constrained capital markets. Blockholder firms also focus on liquidity out of a concern for recovering their substantial investment. This study suggested that in addition to an emphasis on liquidity, blockholder owners emphasise professionalism in managing the firm. This professionalism, accompanied by a genuine separation of ownership and control, may be critical in minimising the possibility of misappropriation of surplus liquidity. The study showed that blockholder owned firms may not recognise maximum capital investment benefits because of the use of sub-optimal capital budgeting techniques reflecting their liquidity preference, or pay maximum dividends, opting instead to use dividends as a governance tool. However, the ability to separate ownership from the management of the operations may counteract this, leading to an increased focus on net present value (NPV) maximising projects, and a dividend policy aimed at preserving future financial flexibility.

This study highlights the value of qualitative studies in finance research, by providing a deeper insight into the management of firm financial flexibility, under blockholder ownership. It emphasises the importance of considering liquidity as a critical form of financial flexibility. Furthermore, the study shows that two significant factors in controlling principal–principal (PP) conflict may be the ability to separate ownership from control and the appointment of a professional management team.

This research introduces the variable of PP agency in the study of financial flexibility.

The purpose of this study is to gain some insights into how managers perceive and achieve financial flexibility and its value in coping with the 2008 global financial crisis. The study focuses on the following questions: What are the sources and measures of financial flexibility? Do financially flexible firms suffer a lower impact from the crisis? Is financial flexibility related to business flexibility? and Is financial flexibility important for the firm's capital structure decision?

This paper employs two methods: a questionnaire survey and interviews with chief financial officers (CFOs). The results are used to examine the relation between the firm's financial flexibility level and the impact of the global financial crisis on its liquidity, investments, capital structure and business operations. The results are used to analyze the robustness of different financial flexibility measures constructed from the survey data to identify an appropriate financial flexibility measure.

The main finding is that firms with high financial flexibility suffer lower impact from the crisis. The results show that firms with greater internal financing are likely to have lower leverage, higher cash ratios, and suffer a lower impact from the crisis on their business operations. The analysis indicates that an index based on the firm's leverage, liquidity, and operating ratios, similar to the Altman Z‐score, might be a better financial flexibility measure than long‐term debt ratio. The evidence also suggests that financial flexibility is a part of the firm's business strategy and is important for its capital structure decisions.

A major challenge for researchers is how to measure the firm's financial flexibility level, as it is unobservable and difficult to quantify. The innovation of this paper is to directly ask managers about the firm's financial flexibility, from both internal and external financing, construct several financial flexibility variables based on the survey data, and examine their correlations with the global financial crisis impact, to identify a robust financial flexibility measure. The research also provides unique data to investigate the value of financial flexibility during a severe credit crisis.

This study aims to track product market competition and financial flexibility on firms’ business strategies.

For this purpose, 187 listed firms on the Tehran Stock Exchange were selected by the systematic elimination for 2012–2018. The hypotheses were examined using the linear regression model. Ittner and Larcker’s (1997) model assesses the business strategy (dependent variable). The Herfindahl–Hirschman index is used to assess the product market competition (independent variable). Finally, the Frank and Goyal’s (2009) model investigates financial flexibility (independent variable).

The findings indicate that competition in the product market has significantly declined the resort of defensive and invasive business strategies and intensified opportunistic analytical and opportunistic strategies, benefiting from financial flexibility and facilitating defensive and opportunistic adaptation and decreased analytic and invasive strategies. Besides, the product market competition contributes to the firm’s financial flexibility and analytical, opportunistic, invasive and defensive strategies. Most of the studies in the field of business strategy analyzed some factors, such as performance (Zhang, 2016), tax avoidance (Higgins et al., 2015) and share pricing risk (Habib and Hasan, 2017). There is no study to assess the effect of business strategy on product market competition and financial flexibility.

The present study’s findings provide some invaluable concepts for firm managers on the significance of competition in the product market and financial flexibility. Focusing on competition intensity and flexibility level can deal with the board’s ambiguities on market structure and competitive status. The use of profitably competitive investment opportunities leads to selecting the most beneficial strategies, leading to a more efficient allocation of scarce resources and, finally, the enhancement of organizational performance.

Financial flexibility, investment efficiency and effective corporate governance mechanisms have been issues of concern to stakeholders. Yet, little empirical evidence on the combined moderating effects investment efficiency and corporate governance mechanisms on the nexus between financial flexibility and firm performance. This study aims to address this gap and extend the extant literature by examining the moderating effects of corporate governance and investment efficiency on the nexus between financial flexibility and financial performance.

The empirical study is based on progression analysis using a sample of 13,865 US listed companies selected from BoardEx (WRDS) for the period (2010–2022) with 89,198 firm-year observations.

Findings of this study indicate that financial flexibility improves firm value as well as accounting performance. Furthermore, the results reveal that both investment efficiency and corporate governance moderate the effect of financial flexibility on firm performance. The authors complement and extend the literature on the optimal investment strategies domain by showing that the combined impact of corporate governance mechanisms and investment efficiency strengthens the nexus between financial flexibility and firm performance.

Key limitations of this study due to the characteristics of the sample selection: country-specific context and proxies used by this study.

Findings of this study have managerial and theoretical implications for firms’ boardrooms, institutional and individual investors, regulators, academics and other stakeholders regarding behavioural aspects of investment decision-making.

The authors’ novel contribution to the extant literature is articulated by the conceptual framework underlying this study and by the new evidence regarding exploring the combined effect of corporate governance mechanisms on nexus between financial flexibility and companies’ performance.

The purpose of this paper is to examine how employee satisfaction affects firm value around the financial crisis.

The authors use the 2008 financial crisis as exogenous shocks to firms to mitigate endogenous concern that employee satisfaction and firm value can be jointly determined. The authors compare firm value of two groups of firms: the firms on the Fortune magazine’s list of “100 Best Companies to Work For” and matched firms that are not on the list. The authors employ difference-in-difference approaches in the tests.

The authors find that when the crisis happens, the best companies experience larger decreases in firm value than comparable firms. In addition, such decreases in firm value only exist among the best companies with high financial flexibility. The authors also show that job satisfaction alone does not create firm value during the financial crisis; only when interacted with high financial flexibility, employee satisfaction leads to high firm value. Finally, the authors document that best companies do not have any advantage in the recovery of firm value after the crisis, regardless of their level of financial flexibility.

There is considerable debate on whether job satisfaction leads to performance or performance leads to satisfaction (Luthans, 1998). The authors show that the impact of employee satisfaction on firm value changes over time. The authors also identify a crucial factor that impacts the value-creation of employee satisfaction: financial flexibility. The findings suggest that the ambiguous results documented in prior literature can be due to the different sample periods and the failure to identify the impact of financial flexibility in previous studies.

The findings provide helpful implications to the business community. The evidence suggests that to reap the benefits of employee satisfaction, companies need to manage their financial flexibility to buffer against potential negative shocks while having strong corporate governance mechanism to mitigate agency concerns. Moreover, the study provides an investment recommendation to socially responsible investment (SRI) and suggests that it is better off implementing dynamic SRI investment strategies according to economic condition.

The evidence suggests that the economic value of employee satisfaction is related to firms’ financial flexibility and economic conditions.

The authors contribute to the literature by showing that the impact of employee satisfaction on firm value changes over time. The test design not only allows the authors to study the effect of employee satisfaction on firm value at a particular point in time, but also helps the authors examine the variation in the effect over economic cycles. This paper also contributes to the literature on SRI. The authors identify a crucial factor that impacts the value-creation of employee satisfaction: financial flexibility.

Poland was coined a ‘green island’ during the Global Financial Crisis (GFC) of 2007–2009 with a stable growth in Gross Domestic Product (GDP), while other countries experienced a dramatic drop in the GDP growth. We assumed that this is due to the stronger resilience of Polish economy and Polish companies.

The aim of the research is to identify the companies' stability (resilience) in the crisis situations (especially the GFC and COVID-19 crisis). We also wonder whether corporate resilience is accompanied by the financial flexibility.

We use GDP growth rate and Profitability as the measures of the resilience. Additionally, we include in our research financial flexibility measured by debt and cash ratio as factors affecting corporate resilience. Our research covers the period 2000–2021. Our data refer to three European countries: France and Germany as the leading European countries and Poland as the leader of changes in Central and Eastern Europe.

We found that Polish economy – against German and French – have higher GDP growth and profitability ratio over the 2000–2021 period. These ratios also show lower volatility around the trend. We proved that higher corporate resilience is accompanied by higher financial flexibility of Polish companies.

This paper aims to propose a model to assess managerial flexibility and its determinants.

The authors perform a literature review to identify the main dimensions of managerial flexibility. Flexibility as a firm capability to co‐align the firm and the business environment permanently is deeply related to the notion of fit. The proposed model integrates different approaches to fit. Based on an empirical, transnational study, the research proposes a model for managerial flexibility.

Three types of flexibility are measured: managerial flexibility, financial flexibility and metaflexibility. Financial flexibility and metaflexibility determine the degree of managerial flexibility, which in turn has positive implications for performance.

The variables included in the model are not exhaustive. The concept of fit implies a static perspective of flexibility.

The results are useful both for researchers and for practitioners. Researchers can benefit from a review of managerial flexibility and a methodology that combines different approaches to fit: matching, covariation and profile deviation. Practitioners can learn that managerial flexibility, articulated in some managerial practices, has positive effects on performance when they are in line with the requirements of the environment. In order to activate these practices, firms should maintain a commitment to learning capabilities and financial resources.

Three contributions are important for research. First, the paper proposes a model for explaining the nature of managerial flexibility. Second, it shows that flexibility and fit are interrelated concepts and that fit improves the measurability of flexibility. Third, managerial flexibility has positive implications for firm performance.

This paper aims to study the leverage adjustment behavior of firms distinguished based on financial flexibility. Financial flexibility is one of the key strengths of the companies to borrow funds for long-term capital investment. The lack of extensive studies in this domain motivates the authors to delve into the significance of financial flexibility in making corporate capital structure decisions.

The data comprise a combination of firm-specific and macroeconomic variables for firms in eight manufacturing sectors from 2009 to 2020. The authors employ an advance estimator, dynamic panel fraction, on the partial adjustment model to investigate the diverse impact on capital structure's speed of adjustment (SoA) between the financially flexible and financially inflexible firms. Furthermore, the authors utilize the generalized method of moments and panel-corrected standard errors to establish the robustness.

The empirical analysis reveals that the SoA of financially flexible firms lies between 19.75% and 35.38% and the SoA of financially inflexible firms lies between 11.66% and 25.81%. Due to their conserved debt capabilities, financially flexible firms can rely on leverage to stay near the target whenever they move away from it. Furthermore, financially inflexible firms exhibit a low adjustment speed due to their incompetence to borrow funds to benefit from new growth opportunities. The existence of a target ratio among the studied firms is identified from the positive coefficient of lagged dependent variable, and the relevance of trade-off theory is proved by the quick adjustment speeds in most sectors.

The sectoral distinction in the backdrop of the financial flexibility component adds to the research novelty and managerial implications.