Analysis Of The Path And Effect Of Financial Flexibility On Corporate Value

Financial flexibility enables companies to quickly raise funds from both internal and external sources through the reserve of sufficient cash and the remaining ability to borrow,prevent adverse shocks or seize favorable investment opportunities,and ultimately maximize the value of the company.In the current research on financial flexibility,most of the literature focuses on the relevance of financial flexibility to the value of the firm.There is less research on the impact path between the two.This paper focuses on the path of financial flexibility to corporate value,using literature research methods and case analysis methods.The article first reviewed the relevant theory of financial flexibility,combed the domestic and foreign literature on the interaction between financial flexibility and financing capacity,investment ability,innovation ability and corporate value.The case of Yunnan Baiyao Group Co.,Ltd.(abbreviated as Yunnan Baiyao)was further analyzed from the case perspective.Under the circumstances that the whole pharmaceutical industry has environmental uncertainties and financing constraints,the financial flexibility of Yunnan Baiyao impacts corporate value through three paths: First,ease financing constraints and improve its corporate financing capabilities,allowing it to have sufficient funds to prevent financial risks caused by uncertainties,and further seize the benefits investment;secondly,alleviate investment shortfalls and increase the investment capacity of its enterprises so that it can diversify investments to diversify operational risks,expand the scale of enterprises and increase its market competitiveness;thirdly,increase investment in R&D and enhance its innovative capabilities,it will reduce production costs,increase production efficiency and increase market share,realize corporate profits,and ultimately increase corporate value.Through case studies,this article affirms the role of financial flexibility in the promotion of corporate value,and on this basis,puts forward suggestions that companies should maintain appropriate financial flexibility.