The Study Of Relationship Between Financial Flexibility And Corporate Value

In the fierce market competition, the company strives for the survival and development, in pursuit of value maximization as the goal to engage in production and business operation activities. Enterprise value is the company’s operating performance and efficiency, reflects the company’s operating results. To achieve the goal of maximization of enterprise value relies on the scientific and effective financial decisions. In the environment of uncertainty and shortage of funds, how to choose the financial policy, strengthen risk coping capacity and realize sustainable development has been the key problem.Financial flexibility as a branch of the theory of capital structure, has caused the widespread attention by the foreign scholars. Financial flexibility is related to the financing decision-making, investment decision and dividend distribution decision closely.In order to seize the investment opportunities and to deal with adverse shocks in the future, the enterprise have to maintain financial flexibility. Thus, enterprise’s financing and investment behavior will make corresponding adjustment, this will affect the enterprise’s value eventually.At present, China’s economy is in a critical period of rapid development, China’s enterprises are faced with both a large number of potential investment opportunities and a bigger uncertainty of market and environment. The listed company want to grasp investment opportunities in the future and control risk. Focuses on enterprises’ financial flexibility and carry out related research and guide the manager to make reasonable financial decisions is of great significance.On the basis of the latest research results of scholars at home and abroad, the paper examines enterprises’financial flexibility level through the level of debt, cash holdings level, internal accumulation ability and operation ability, and studies the the relationship between financial flexibility and the enterprise value.The study mainly includes:(1) whether the existence of the financial flexibility will affect the value of the enterprise;(2)whether the different level of financial flexibility has different effect on the enterprise value;(3) in different stages of enterprise development, whether financial flexibility has different influence on the enterprise value.The main content of the article is divided into five parts.The first part:introduction. introduced research background, research significance, research content, framework and research methods.The second part:the basic theory and literature review.In literature review enumerates the impact of financial flexibility to the financing, investment and enterprise value, summarized the current research status and direction of the financial flexibility.The third partr:theoretical analysis about the financial flexibility and enterprise value.Firstly,introduced the concept and characteristics of the financial flexibility;Secondly,based on the real option theory,analysed action mechanism of the financial flexibility to the enterprise value; Finally,analyzed the important role of the financial flexibility to enterprise development.The fourth part:empirical research. The regression results show that the relationship between financial flexibility and enterprise value is inverted u-shaped structure. Keep financial flexibility should follow the principle of moderation. The developing company should keep financial flexibility.The fifth part:research conclusions. According to analysis, the paper put forword the policy suggestions, and research outlook and so on. The listed company should analyze their own situation, choose suitable financial flexibility for their own. And how to grasp the "degree", mainly depends on the evaluation of enterprise internal and external environment, such as the degree of competition among the industry, the stage of company’s development, etc.If the elasticity level is very low, the company should improve financial flexibility urgently.Contribution of this paper is mainly as follows:(1)To combine the research of financial flexibility and enterprise’s financial management activities, broadening the research field of the existing, which laid a foundation for deep research in the theory of financial flexibility.(2)Due to the factors that affect financial elasticity is comprehensive, single financial ratio can’t reflect elastic levels. Through the analysis of the factors influencing the financial flexibility and source, built a comprehensive financial flexibility index system, fully reflects the enterprise’s cash flow ability, leverage level, internal accumulation ability, operation ability, external equity financing ability, enrich the connotation of financial flexibility.(3)Adopt the method of empirical test and draw the conclusion that the relationship between financial flexibility and enterprise value is inverted-U shaped structure for the first time. Moreover, according to the enterprise lifecycle theory, taking the growth factors into consideration in the assessment of enterprise value, the role of financial flexibility to growing enterprises is particularly important.