Value of Financial Flexibility and Firm’s Financial Policies: Empirical Evidence from the Firms Listed in Tehran Stock Exchange

  •  Kazem Rahimi    
  •  Alireza Mosavi    


The main objective of this paper is to investigate the relationship between financial flexibility and financial policies of the firms listed on Tehran stock exchange. The population of this descriptive-correlational study is comprised of all firms listed on Tehran stock exchange during the years 2010 to 2014. From this population, a sample of 155 firms is created through systematic elimination. The research hypotheses are investigated via multivariate regression, integrated data model and estimated generalized least squares (EGLS) methods. This research uses panel data technique as its statistical method, and utilizes Eviews9 and Excel softwares for data analysis. Results of investigations show that value of financial flexibility has significant inverse relationship with firm’s dividend payouts, its financial leverage, and the change in its cash balance. The results also suggest that firms putting more value to their financial flexibility have lower dividend payouts, prefer stock redemption to paying dividends, have lower leverage ratios, and tend to accumulate more cash.

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