A Study Of Financial Flexibility Status And Investment Decisions Of Chinese Listed Companies

As the rapid development of the global economy has created great opportunities for our enterprises,it also brought many challenges to our enterprises,especially the increasingly fierce market competition and the intensification of the uncertainty of the environment.After the financial crisis of 2008,more and more enterprises continue to focus on maintaining financial flexibility.Financial flexibility(FF)means that enterprises can mobilize financial resources to "prevent" the adverse impact of the uncertainty of the environment,and at the same time,in the face of adverse shocks,FF can "use" and bear the uncertainty of the environment,it facilitate the company raise the required funds at lower cost to take the appropriate investment projects and reduce the possibility of getting into trouble.FF takes both preventive and utilization attributes into consideration.It is the result produced through enterprises' active response to the uncertainty of the environment and the active use of environmental uncertainty,what's more the result of the effective allocation of financial resources for enterprises.In this paper,the "cross period" of FF is taken into consideration.the standard of defining Financial flexibility status(FF status)as maintaining FF for more than 3 consecutive years,including maintaining cash flexibility or debt flexibility for more than 3 years have entered a FF status.The cash flexibility or debt flexibility accumulated over 3 years in the FF status is the financial flexible resources of the enterprises' cross term reserve,which is defined as the financial flexiblility reserve(FF reserve)in this paper.This paper studies the unique period of FF and the financial flexible reserve at the same time,so it quantifies the FF reserve across periods and it determines whether the enterprise is in the FF status by quantifying the FF reserve and measuring the extent of keeping FF status.Compared with the FF of the single period,the study of FF expands the time dimension,it emphasizes the persistence of FF and the accumulation of financial flexible resources,so the financial flexibility status reflects the "preventive attributes" of the FF which is taken into account,it also reflects the robustness of the financial policy.As the FF status represents the more robust policy,so the influence of internal resources and environment on investment decisions and investment efficiency under the FF status is more regular.Therefore,this paper mainly investigates the "prevention" attribute of the listed companies in China,which pays more attention to reserve FF,through reserving the several stages FF to push the enterprises step into the FF status,or pay more attention to the "utilization" attributes of FF.On the basis of the above analysis,the company which is not in the financial flexible state is considered as the control group,and the comparative analysis is made.The different impacts made on internal and external investment decisions of listed companies between financial flexible status and non financial flexible status,so as to further study the difference in FF policy to influence the investment efficiency of listed companies,and to explore whether the robustness of FF policy between the two types of companies can improve the investment effectiveness.This paper empirically examines the impact of FF on investment decision based on studying the literature about the influence of FF on investment and investment efficiency.The first chapter empirically studies the influence path and influence degree of FF on internal investment decision;the second chapter empirically studies the influence of FF on external investment decision;the third chapter empirically studies the effect of FF on investment efficiency.Based on the data and other financial data of A-share listed companies in Shanghai and Shenzhen from 2003 to 2016,we get the following conclusions.Firstly,the financial flexible status of the listed companies is summarized as follows: the companies in the Sample Firms reserve the FF of the financial resources are basically maintained at the level of 40%.The listed companies under FF status,because of the reserve of financial flexible resources,so the FF is generally higher,the different life cycle stages of the company will also affect the FF and FF reserve to significant extent due to the large difference of the operating environment and development potential.From the level of FF,the maturity period pays more attention to the maintenance of financial flexible resources to maintain FF status.Secondly,The conclusion about the relationship between internal investment decisions and cash flexibility caused by FF status is summarized as follows: the positive impact of cash flexibility on the investment of intangible assets is greater than that of fixed assets when the enterprise does not reach FF status,and the positive effect of cash flexibility to the two types of internal investment decisions is positive when an enterprise has reached FF status.In the FF status,the positive impact of cash flexibility and fixed assets is greater in FF.The conclusion of the changes in the relationship between internal investment decision and cash FF caused by FF status is summarized as follows: under non-FF status,the positive impact of debt flexibility on intangible assets is greater than that of fixed assets,which is consistent with the impact of cash flexibility on the two types of internal investment decisions;after achieving FF status,the capability of liability FF's potential attribute improved to be realizable financial flexible can be improved.But the impact of Sample Firms' liability FF on two kinds of investment decisions has not changed.Therefore,FF only changes the impact of cash FF on the two types of internal investment decisions.For enterprises with only liability FF,whether FF policy is robust has not different impact on the firm's internal investment decisions.For high and new technology enterprises,there is no significant correlation between cash FF and intangible assets investment in non-FF status,and a negative impact on the investment decision of intangible assets under FF status.Whether or not in FF status,debt FF and intangible assets investment are significantly positive correlation,the correlation is less under FF status..Thirdly,the effects of FF on external investment decision are summarized as follows: cash flexibility can reduce the total amount of merger and acquisition's final payment to a certain extent,the more the cash flexibility,the lower the total payment of M & A,the positive impact of cash FF on M & A performance is larger,and the degree of impact on M & A performance.FF can help enterprises control the scale of M & A and improve the performance of M & A better.Enterprises take the robust financial policy,reserve financial flexible resources and maintain FF status will affect the impact of management decision on M & A.FF status can play a buffer role in the impact of management decision on the scale of merger and acquisition and the performance of M & A.Therefore,the firm's prudent FF policy can help the enterprises to control the scale of M & A to a greater extent and improve the performance of M & A,what's more it also affects the impact of management on M & A.The effect of FF status on investment efficiency is summarized as follows: FF status can only alleviate the relationship between cash FF and inefficient investment,and the extent to which liability FF affects non efficient investment increases after FF.The optimization of investment efficiency based on the duration of FF status is as follows: in the optimization of over investment,if the FF of the enterprise is mainly cash FF,the longer the duration of the FF,the smaller the positive impact of the cash flexibility on over investment.The FF is mainly liability FF,the longer the duration of the financial flexible status,the more it is against the optimization of over investment.If the firm has both cash FF and liability FF,the impact of cash FF and liability FF on over investment decreases with the continuous increase of keeping time.Enterprises should determine the duration of FF which also means the degree of robustness of FF policy based on what kind of FF they reserve.