Financial Flexibility and Decisions on Capital Structure Studying the Relationship

The aim of this study is to investigate the relationship between financial flexibility and capital structure decisions in companies admitted to the Tehran Stock Exchange. The research method is descriptive while using correlation. The hypothesis was tested via multivariate linear regression models as well as panel data method. The time period of research is 2006-2010 and the sample consists of 82 companies which are already admitted to the Tehran Stock Exchange. The results indicate that marginal value of cash is negative in terms of the market. Furthermore, findings show that there is no significant relationship between marginal value of financial flexibility and capital structure decisions of firms under study, which is the firms, would not consider financial flexibility level in their decisions regarding increasing or decreasing debts. Such lack of consideration would in the long term, result in the loss of financial flexibility as well as missing profitable investment opportunities.

Abstract licence: CC BY-NC-ND

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