Journal ArticleDOI
Modified Total Interpretive Structural Model of Corporate Financial Flexibility
TLDR
In this article, the authors identify key enablers of financial flexibility and structure them into a total interpretive structural model using modified TISM approach, using literature review, business environment, cost of capital, stage of life cycle, free cash reserves, agency relations, payout policy, and leverage as seven constituents of corporate financial flexibility.Abstract:
In present dynamic environment, financial flexibility has become an important constituent of corporate finance decisions. Financial flexible firms are ostensibly more resilient to exogenous shock vis-a-vis non-flexible firms. Capital structuring decisions, payout decisions and conservative cash policy are various tactics adopted by financial managers for attaining financial flexibility. Present study attempts to identify key enablers of financial flexibility and structure them into a total interpretive structural model using modified TISM approach. Using literature review, business environment, cost of capital, stage of life cycle, free cash reserves, agency relations, payout policy, and leverage are identified as seven constituents of corporate financial flexibility. Based on their interpretive interdependencies/ relationship, a hierarchical model of financial flexibility is developed exhibiting a holistic view of financial flexibility decisions from triggers to final outcome. The findings result into a four-step novel framework situation-actors-actions-outcome framework of financial flexibility, with business environment and stage of life cycle as situation/ triggers, free cash reserves and agency as actors/precursors, payout and leverage as actions/ decisions and cost of financing as outcome of financial flexibility decision. Model lends credence to financial flexibility as situation-specific decision. It is a reservoir to address exogenous income and investment shocks. Firms generating free cash flow are invariably flexible to meet income and investment shocks. However, firms with fluctuating operations need buffer in form of cash reserves or debt capacity to address the contingencies. Investment in good corporate governance practices can serve as an intangible reserve and an alternative to costly tangible ways such as cash surplus and leverage. Such firms with shareholders’ support are deemed more flexible in payouts, capital structuring, investment decisions and overall operations, and less reliant on external financing.read more
Citations
More filters
Posted Content
Optimal Capital Structure and Industry Dynamics
TL;DR: In this paper, a competitive equilibrium model of capital structure and industry dynamics is presented, where firms make financing, investment, entry, and exit decisions subject to idiosyncratic technology shocks.
Journal ArticleDOI
Determinants of deglobalization: A hierarchical model to explore their interrelations as a conduit to policy
Shamita Garg,Sushil +1 more
TL;DR: In this article, a modified total interpretive structural modeling (TISM) model has been used to explore the relationship between the determinants that led to deglobalization and the polarity in TISM.
Journal ArticleDOI
Exploring “what,” “why” and “how” of resilience in MSME sector: a m-TISM approach
TL;DR: In this article , the authors have done a comprehensive literature analysis of the enablers for the micro, small and medium enterprise (MSME) industry to enable effectively and efficiently during emergencies and pandemics.
Journal ArticleDOI
Impact of Elimination of Dividend Distribution Tax on Indian Corporate Firms amid COVID Disruptions
TL;DR: In this article, the impact of the Indian Finance Act 2020 on corporate dividend behavior in India has been explored, including the determinants of dividend payouts, changing payout decisions, dividend behavior of regular payers, and the prevalence of factors associated with changing payouts.
Journal ArticleDOI
Dynamics of the termination of global alliances: probing the past, analyzing the present and defining the frontiers for future research
TL;DR: A bibliometric analysis of the literature on alliance termination is performed and a model for future research agenda that links the termination phase to the pre-alliance termination phase and post alliance termination phase is proposed.
References
More filters
Journal Article
The Cost of Capital, Corporation Finance and the Theory of Investment
TL;DR: In this article, the effect of financial structure on market valuations has been investigated and a theory of investment of the firm under conditions of uncertainty has been developed for the cost-of-capital problem.
Posted Content
Agency Costs of Free Cash Flow, Corporate Finance, and Takeovers
TL;DR: In this paper, the benefits of debt in reducing agency costs of free cash flows, how debt can substitute for dividends, why diversification programs are more likely to generate losses than takeovers or expansion in the same line of business or liquidationmotivated takeovers, and why the factors generating takeover activity in such diverse activities as broadcasting and tobacco are similar to those in oil.
Journal ArticleDOI
Dividend Policy, Growth, and the Valuation of Shares
TL;DR: In this paper, the effect of differences in dividend policy on the current price of shares in an ideal economy characterized by perfect capital markets, rational behavior, and perfect certainty is examined.
Journal ArticleDOI
The Capital Structure Puzzle
TL;DR: The Capital Structure Puzzle as discussed by the authors is a well-known problem in finance, and it has been studied extensively in the literature, e.g., The Journal of Finance, Vol. 39, No. 3, 1983 (Jul., 1984), pp. 575-592.
Journal ArticleDOI
The theory and practice of corporate finance: Evidence from the field
TL;DR: The authors survey 392 CFOs about the cost of capital, capital budgeting, and capital structure and find some support for the pecking-order and trade-off capital structure hypotheses but little evidence that executives are concerned about asset substitution, asymmetric information, transactions costs, free cash flows, or personal taxes.