Wu, Wei, Alkaraan, Fadi and Le, Chau (2023) The moderating effects of corporate governance and investment efficiency on the nexus between financial flexibility and firm performance. Journal of Financial Reporting and Accounting . ISSN 1985-2517
Full content URL: https://doi.org/10.1108/JFRA-05-2023-0234
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Item Type: | Article |
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Item Status: | Live Archive |
Abstract
Purpose
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.
Design/methodology/approach
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 – 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.
Research limitations/implications
Key limitations of this study due to the characteristics of the sample selection: country-specific context and proxies used by this study.
Practical implications – 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. Originality/value – 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.
Keywords: | Financial flexibility, Investment efficiency, Corporate governance, Firm performance |
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Subjects: | N Business and Administrative studies > N400 Accounting N Business and Administrative studies > N990 Business and Administrative studies not elsewhere classified N Business and Administrative studies > N100 Business studies N Business and Administrative studies > N120 International Business studies N Business and Administrative studies > N900 Others in Business and Administrative studies |
Divisions: | COLLEGE OF ARTS, SOCIAL SCIENCES AND HUMANITIES > Lincoln International Business School > Department of Accountancy, Finance and Economics |
ID Code: | 55850 |
Deposited On: | 13 Sep 2023 07:54 |
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