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Corporate Financial Flexibility, Investment Activities, And Cash Holding: Evidence From Indonesia

Indonesian Capital Market Review

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Title Corporate Financial Flexibility, Investment Activities, And Cash Holding: Evidence From Indonesia
 
Creator Rahmat Heru Setianto; Departemen of Management, Faculty of Economics and Business, Universitas Airlangga
Addenver Kusumaputra; Departemen of Management, Faculty of Economics and Business, Universitas Airlangga
 
Subject financial flexibility, cash flow, investment, emerging economy
 
Description This paper examines empirically the impact of financial flexibility on investment activities. Furthermore, we also investigate how financial flexibility determines the sensitivity of investment activities to cash flow. Using annual data of Indonesian manufacturing firms spanning five years, our analyses reveal that financial flexibility enhances investment ability and decreases sensitivity of investment activities to cash flow. Further analysis indicates that financially flexible firms in Indonesia tend to hold higher cash as a buffer to achieve financial flexibility. These findings yield important implications to managers and investors as Indonesia’s domestic market is expanding rapidly and large business opportunities are created. This condition provides firms with incentive to grow faster, hence increasing financing needs to finance firms’ expansion.
 
Publisher Management Research Center, Department of Management, Faculty of Economics and Business, U
 
Contributor —
 
Date 2017-11-29
 
Type Peer-reviewed Article
 
Format application/pdf
 
Identifier http://journal.ui.ac.id/index.php/icmr/article/view/7470
 
Source Indonesian Capital Market Review; Vol 9, No 2 (2017): July 2017 (in press)
 
Language en