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2013 (Vol. 5, Issue: 14)
Article Information:

The Relationship between Financial Flexibility and Capital Structure Decisions

Roya Darabi, Salah Mohamadi, Ahmad GHasemi and Shanaz Forozan
Corresponding Author:  Roya Darabi 

Key words:  Abnormal returns, capital structure, financial flexibility, financial leverage, marginal value of cash, ,
Vol. 5 , (14): 3843-3850
Submitted Accepted Published
October 22, 2012 December 28, 2012 April 20, 2013
Abstract:

Making decisions about capital structure is one of the most challenging and problematic issues companies face and thereby it is the most crucial decisions companies have to make for their survival. The aim of this study was to investigate the relationship between financial flexibility and capital structure decisions in accepted companies in Tehran Stock Exchange with using Falkner and Wang Model. Results of testing hypothesis which are based on a sample- that is consisted of 82 firms for a period of five years from 2006 to 2011- using multivariate linear regression models as well as panel data method, implied that marginal value of cash is negative in terms of market, i.e. the market is not willing to raise funds and will not evaluate this increase to be positive in funds. Furthermore, findings represent that there is no significant relationship between marginal value of financial flexibility and capital structure decisions of firms and firms would not pay attention to financial flexibility level in their decisions regarding increasing or decreasing debts, which in long term would result in loosing financial flexibility as well as profitable investment opportunities.
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  Cite this Reference:
Roya Darabi, Salah Mohamadi, Ahmad GHasemi and Shanaz Forozan, 2013. The Relationship between Financial Flexibility and Capital Structure Decisions.  Research Journal of Applied Sciences, Engineering and Technology, 5(14): 3843-3850.
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ISSN (Online):  2040-7467
ISSN (Print):   2040-7459
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