Environmental Uncertainty, Financial Flexibility And Enterprise Value

In today’s ever-changing age of globalization, the basic environmental characteristics of Chinese enterprises are facing is uncertainty. On one hand, this feature is from the international capital market’s uncertainty, such as the U.S. sub-prime mortgage crisis and the European sovereign debt crisis. Meanwhile the worldwide advancements of science and technology are for the benefit of the enterprises, but also bring the greater risk to the production and operation of the enterprises. On the other hand, with the deepening of China’s reform and opening up, China’s economic transformation, transformation of government functions and environmental issues also have the subtle impact on business decisions. Particularly, in a state of underdevelopment in the context of China’s capital market, corporates reserving adequate financial flexibility to respond to adverse shocks and take adventage of the profitable investment opportunities is particularly critical. In the area of financial management, financial flexibility is still a relatively new research area, which is drawing increasingly attentions of practitioners and theorists. Based on this, this thesis intends to make depth and systematical research of the financial flexibility from entry point of the environmental uncertainty which China’s listed companies generally faced with.In theoretical terms, this thesis broadens the idea of research of financial flexibility, and studies the relationship between financial flexibility and enterprise value. At the same time, this thesis puts environment uncertainty into the framework, and provides empirical evidence of the essential nature of financial flexibility. Finally,the effect of financial flexibility in different property nature of enterprise is carried out.In practical terms, this thesis provides new ideas for enterprise to optimize financial allocation of resources and reserve reasonable financial flexibility. It also provides a new method to respond to the growing environment uncertainty. At last, this thesis offers some new proposals to establish a more perfect and fairer capital market.This thesis is organized as follows:The first part is an introduction. This part is mainly made up of the research background and the theoretical and practical significance. On this basis, this part also introduces the research objectives and contents, as well as the research methods used and innovative points of this thesis.The second part is the literature review section. This part will sort and summarize the domestic and foreign relevant literatures of financial flexibility, environmental uncertainty and enterprise value. Based on this, the research of this thesis is carried out.The third part is the theoretical basis and hypothesis deduction. This part describes the deputation theory, trade-off theory, pecking order theory,organization learning theory and strategic management theory. Meanwhile, on the basis of these theories, this part will include theoretical analysis and the deduction of hypothesis.The fourth paty is the empirical study of environmental uncertainty, financial flexibility and enterprise value. This section is made up of study design, descriptive statistical analysis, correlation analysis and multiple regression analysis. Finally, the thesis will carry out the robustness tese of the research hypothesis.The fifth part is the research conclusion, policy suggestion and limitation. Firstly, this part will come up with the major conclusions. Then, it will put forward the corresponding policy suggestions. Finally, this part will point out the limitations of this thesis and the development trends in the future.This thesis takes data from China’s listed companies in stock markets of Shanghai and Shenzhen during the period of2008-2012, and comes up the conclusions as follows:(1) At present, the overall level of the reservation of financial flexibility of listed companies is not high. Compared with non-state-owned enterprises, state-owned enterprises have the lower level of financial flexibility;(2) There is a positive correlation between financial flexibility and enterprise value. Specially, companies can improve their value by pre-reserving financial flexibility;(3) Considering environmental uncertainty which the companies are facing, the larger environmental uncertainty is, the greater the effect of the financial flexibility of enhancing enterprise value is;(4) Conducting the research on the different nature of property rights in listed companies finds that, compared with the state-owned enterprises, when the non-state-owned enterprises are facing the larger environmental uncertainty, the effect of the financial flexibility of enhancing enterprise value is greater.The main innovations of this thesis are the following three points:(1) Respectively, this thesis uses the continuous variable and the dummy variable and is from the perspective of both quantitative and qualitative to measure financial flexibility. In this way, it can not only enrich financial flexibility’s metrics, but also provide a more solid evidence for the study conclusions;(2) Starting from the definition of financial flexibility and around the "prevention" and "utilization" essential nature of financial flexibility, this thesis puts environmental uncertainty into framework of financial flexibility and enterprise value, analyzes the effect of environment uncertainty on the financial flexibility to enhance enterprise value;(3) Combining with the special problem of the nature of property rights, this thesis reserches the relationship between financial flexibility and enterprise value. It also can give some new ideas of financial management of different ownership companies.