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This study aims to examine how corporate financial flexibility, financial sector development and the regulatory environment influence corporate investment decisions in an emerging economy after controlling for several macroeconomic factors.

The authors estimated random-effects models to empirically examine the impacts of corporate financial flexibility, banking sector development, equity market development, regulatory quality and corruption on corporate investment decisions. The empirical analysis is based on an unbalanced annual panel data set of a sample of 198 non-financial firms listed on the Pakistan Stock Exchange for the period 1992–2018.

The results show that financially flexible firms tend to invest more. The increased banking sector development, stock market development and better regulatory quality play a pivotal role for enabling firms to increase their investment ability. However, the results reveal that corruption acts as a barrier and reduces corporate investments during the examined period. The results suggest that unused borrowing capacity is a good source of financial flexibility. These results strongly support the pecking order theory, which explains why firms incline toward internal sources for financing their investments and why they prefer debt to equity when go for external financing.

The empirical findings of the study enable corporate managers to make better financing and investment decisions by understanding the significance of the attainment and maintenance of the corporate financial flexibility to enhance firm value. Furthermore, the findings enable corporate managers to examine and understand the role of banking sector development (BSD), equity market development (EMD), regulatory quality and the role of corruption in affecting corporate firms' investment ability, allowing them to make appropriate investment decisions, especially from an emerging economy perspective. The findings also help investors in making appropriate investment decisions while they are purchasing financial assets. Finally, the findings of the study have some implications for regulators as well. Specifically, the findings suggest that the authorities should implement economic and financial policies favoring banking sector as well as equity market development to enhance corporate investment.

The study significantly adds to the literature by examining the impact of financial flexibility, financial sector development and regulatory environment on corporate investment decisions. According to the authors' knowledge, the empirical evidence examining the impact of all of these factors on corporate investment is very scarce. Therefore, this study is an effort to fill the gap left in the literature.

The literature dealing with the firm's financing decisions in developing capital markets is limited. This paper aims to contribute to the published research by documenting the perceptions of managers of Omani firms listed on the Muscat Securities Market with regards to the capital structure of their firms. Survey responses show that financial decision‐making behavior of Omani firms can be explained by the “pecking order” view of capital structure. The effect of tax and bankruptcy on capital structure is not clear. Firms' relationships with banks and government shareholdings minimize the effect of financial distress. Further, managers tend not to release information to the suppliers of funds even though this might reduce the cost of funds required. Most firms seem to maintain spare borrowing policy. The conclusion is that executives of Omani firms are not less sophisticated than their American, Australian, British, Korean, Hong Kong, or Singapore counterparts in terms of their decision‐making process related to financial leverage.

The purpose of this paper is to examine the effects of financial flexibility as represented by excess cash holdings and debt capacity upon firm returns after periods of high market uncertainty.

Days of high uncertainty are identified from 1987-2011 using the VXO Index (implied volatility of the S&P 100) yielding approximately 45,000 firm events. The main variables of interest are excess cash (Duchin et al., 2010) and debt capacity. Two financial constraint indexes are used as controls in a cross-sectional OLS regression.

The precautionary value of cash during and after times of uncertainty is beneficial. A positive relationship exists for periods of up to two years following the initial day of high uncertainty. Positive BHRs exist on a zero-cost trade investing in a portfolio of high excess cash firms and shorting a portfolio of cash constrained firms. The value of excess debt capacity, on the other hand, is harder to discern; positive profits are obtainable on a zero-cost trade while regression estimates are typically insignificant on average.

This paper expands the financial flexibility literature by testing the effects of financial flexibility on returns following days of high market uncertainty.

This study examines the influence of economic policy uncertainty on financial flexibility before and during the coronavirus disease 2019 (COVID-19) pandemic. Few prior studies have examined this association specifically for debt and cash flexibility.

Using quarterly data from 2016 to 2022, 1014 observations were collected from the S&P Capital IQ database for listed tourism companies in India. The pre-pandemic period is defined as 2016 Q1 to 2020 Q1, whereas the pandemic period is from 2020 Q2 to 2022 Q3. The data are analysed using ordinary least squares, probit, logit and difference-in-difference (DID) estimation.

The evidence of this study suggests a negative association of economic policy uncertainty with debt flexibility during the COVID-19 pandemic. The findings also suggest that COVID-19 induced economic policy uncertainty results in high cash flexibility. This meets the expectations for the crisis period, as firms are likely to hold more cash and less debt capacity to manage their operations. The results are robust for various estimation techniques.

This study is limited to one emerging country and is specific to one non-financial sector. Future research could extend to more emerging countries and include other non-financial sector companies.

The findings of this research are useful for tourism sector managers as they can effectively manage their cash and debt flexibility during crisis periods. They will need to prioritise cash flexibility over debt flexibility to manage operations effectively. Policymakers need to provide clear and stable economic policies to help firms manage their debt levels during a crisis.

To the best of the author's knowledge, no existing studies have investigated the influence of economic policy uncertainty on the financial flexibility of tourism companies before and during the COVID-19 pandemic. Furthermore, this study establishes a novel set of critical determinants, such as economic policy uncertainty.

Sees the objective of teaching financial management to be to help managers and potential managers to make sensible investment and financing decisions. Acknowledges that financial theory teaches that investment and financing decisions should be based on cash flow and risk. Provides information on payback period; return on capital employed, earnings per share effect, working capital, profit planning, standard costing, financial statement planning and ratio analysis. Seeks to combine the practical rules of thumb of the traditionalists with the ideas of the financial theorists to form a balanced approach to practical financial management for MBA students, financial managers and undergraduates.

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 paper is to identify firms in the UK adopting a policy of high cash and low leverage and investigate how executive ownership contributes to this decision.

Firms following this policy are identified both by using a fixed classification approach and the analysis of the distribution of cash and leverage. Logit analysis is then used to estimate the probability of adopting the policy as a function of executive ownership.

Extreme financial policies are suboptimal as firms adopting these policies tend to undershoot (overshoot) their target leverage (cash holdings) ratios. The impact of the executive ownership on the probability of adopting this policy is U-shaped, in line with the alignment–entrenchment hypothesis.

Despite the substantial presence of non-executive directors in the boards and a significant amount of shareholdings by executive directors, the firms under analysis have adopted suboptimal financial policies possibly because poorly governed or because executive ownership is the range where entrenchment is feasible.

This is the first attempt at recognising policies of high cash and low leverage as being explicitly interdependent. It is also the first study focussing on the UK, a country of interest, because ownership structure is relatively dispersed. Moreover, instead of choosing fixed threshold levels of the variable in defining the extreme financial policy, this paper proposes the analysis of the distribution of cash holdings and leverage and accounts for target levels of cash and leverage.

The main objective of this study is to examine whether firms follow the financing hierarchy as suggested by the Pecking Order Theory (POT). The External Funds Needed (EFN) model offers a financing hierarchy that can be used for examining the POT. As far as the EFN considers growth of sales as a driver for changing capital structure, it follows that shall firms plan for a sustainable growth of sales, a sustainable financing can be reached and maintained. This study uses data about the firms listed in two indexes: Dow Jones Industrial Average (DJIA30) and NASDAQ100. The data cover quarterly periods from June 30, 1999, to March 31, 2012. The methodology includes (a) cointegration analysis in order to test for model specification and (b) causality analysis in order to show the generic and mutual associations between the components of EFN. The results conclude that (a) in the majority of the cases, firms plan for an increase in growth sales but not necessarily to approach sustainable rate; (b) in cases of observed and sustainable growth of sales, firms reduce debt financing persistently; (c) firms use equity financing to finance sustainable growth of sales in the long run only, while in the short run, firms use internal financing, that is, retained earnings as a flexible source of financing; and (d) the EFN model is quite useful for examining the hierarchy of financing. This study contributes to the related literature in terms of utilizing the properties of the EFN model in order to examine the practical aspects of the POT. These practical considerations are extended to examine the use of the POT in cases of observed and sustainable growth rates. The findings contribute to the current literature that there is a need to offer an adjustment to the financing order suggested by the POT. Equity financing is the first source of financing current and sustainable growth of sales, followed by retained earnings, and debt financing is the last resort.

The main aim of this paper is to report on a comprehensive survey of corporate financing decision‐making process in Sri Lankan listed companies and to compare these results with those of similar studies conducted in developed markets.

The study was based on a survey questionnaire distributed among the chief executive officers (CEOs) of companies listed on the Colombo Stock Exchange, with the content of the questionnaire being based upon a review of theoretical and empirical literature in the field of finance.

The results demonstrate an adherence to a financial hierarchy, which appears to be the dominant financial policy among listed Sri Lankan companies. Corporate financing decisions seem to be influenced mostly by interest and tax considerations, while lesser weight is accorded to financial flexibility in determining the amount of funds to be raised externally through debt contracts. The evidence largely supports the propositions of the pecking order model, but also confirms some predictions found in static trade‐off theory.

Some of the most striking implications of the analysis relate to the under‐development of the local capital market, and the apparent need for an efficient financial system that spurs economic growth. An efficient capital market will in turn ensure that capital will be more easily channeled into financing investments.

This paper highlights how and why the determinants of capital structure decisions reported for developed capital markets may differ from those existing in transitional or emerging economies.

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.