The Effect of Financial Flexibility on Financial Behavior of Companies Listed in Tehran Stock Exchange

Abstract

The flexibility plays an important role in making the managers powerful in the regard of investment in the future. The problems of the capital market have necessitated the maintenance of flexibility for the companies for the purpose of using profitable opportunities. The present research has aimed to study the effect of financial flexibility on the financial behavior. The statistic sample used in the present study consists of 100 companies accepted in Tehran stock exchange during the years 2009 to 2015. The financial flexibility and financial behavior are respectively the independent and dependent variables which were measured by the investment activity, dividend payout ratio, amount of cash holding and company value. The data analysis was done by the use of the multi-variable regression models based on the panel data techniques and the use of Eviews econometrics software. The results concluded from the study of effect of the financial flexibility on the financial behavior corresponding to the theoretical foundations which had meaningful and positive effects. Therefore, the hypothesis that the financial flexibility has positive and meaningful effects on the investment activity of the companies accepted in the stock exchange was confirmed. The other results of paper were that the financial flexibility had negative and meaningful effects on the dividend payout ratio. So, the hypothesis that the financial flexibility has negative and meaningful effects on the dividend payout ratio of the companies accepted in the stock exchange was not confirmed. The hypothesis that the financial flexibility has positive and meaningful effects on the amount of cash holding of the companies accepted in the stock exchange was not confirmed, because the effect of the flexibility on the amount of cash holding was not meaningful. Also, the hypothesis that the financial flexibility has positive and meaningful effects on the value of companies accepted in the stock exchange was confirmed.