ASSIGNMENT NO. 1 (MID TERM)
ON
To Identify Research Topic, Write Problem Statement and Research Question
SUBMITTED TO
DR. SAFYAN MAJID
PROFESSOR, ADVANCED CORPORATE FINANCE
SUBMITTED BY
NASEER AHMAD………………………….ROLL NO. 1102-MSBF-22
SOFIA QASIM…..………………………….ROLL NO. 1110-MSBF-22
DEPARTMENT OF COMMERCE AND FINANCE
GOVERNMENT COLLEGE UNIVERSITY, LAHORE
The Impact of Financial Flexibility on Corporate Investment and Performance during
Economic Crises.
Problem Statement:
Financial flexibility refers to the ability of a company to access and utilize financial resources
effectively to maintain or improve its operations, even in times of financial stress or uncertainty. 1
Companies with higher financial flexibility are better positioned to take advantage of investment
opportunities and weather economic crises.2 The COVID-19 pandemic has demonstrated the
importance of financial flexibility in sustaining business operations during crises.3
This research aims to investigate the relationship between financial flexibility, corporate
investment, and performance during economic crises. In particular, the study will explore the
extent to which financial flexibility affects investment decisions and performance outcomes during
crises.4
While prior research has established a positive association between financial flexibility and
investment decisions, the effects of financial flexibility on corporate performance during economic
crises remain unclear. Furthermore, the role of financial flexibility in enhancing the sustainability
of enterprise development during the COVID-19 pandemic is a relatively unexplored area of
research.5
Therefore, this research seeks to address the following research questions:
1. To what extent does financial flexibility affect corporate investment decisions during
economic crises?
2. What is the impact of financial flexibility on corporate performance during economic
crises?
3. How does financial flexibility contribute to the sustainability of enterprise development
during the COVID-19 pandemic?
To answer these research questions, this study will employ a mixed-methods approach that
combines quantitative and qualitative research methods.
The quantitative component of the study will involve the collection and analysis of financial data
from a sample of publicly listed firms across different industries and countries. Financial flexibility
will be measured using various financial ratios, such as cash ratios, debt-to-equity ratios, and
liquidity ratios. Investment decisions will be measured using various investment indicators, such
as capital expenditures and research and development expenditures. Corporate performance will
be measured using financial performance indicators, such as return on assets and return on equity.
The qualitative component of the study will involve the collection and analysis of data from
interviews with managers and executives of selected firms. The purpose of the interviews is to
gain insights into the factors that influence investment decisions and the role of financial flexibility
in corporate performance during economic crises.
The results of this study will have significant implications for policymakers, investors, and
managers. Policymakers can use the findings to develop policies that promote financial flexibility
among firms to enhance their resilience during economic crises. Investors can use the results to
identify companies that are better positioned to weather economic crises and make investment
decisions accordingly. Finally, managers can use the findings to develop strategies that enhance
the financial flexibility of their firms and improve their investment decisions and performance
outcomes.
Research Objective:
The objective of this study is to investigate the relationship between financial flexibility, corporate
investment, and performance during economic crises, with a particular focus on the role of
financial flexibility in promoting sustainable enterprise development during the COVID-19
pandemic.
General Objective:
To examine the impact of financial flexibility on corporate investment decisions and performance
during economic crises, with an emphasis on the sustainability of enterprise development during
the COVID-19 pandemic.
Specific Objectives:
1. To explore the extent to which financial flexibility affects corporate investment decisions
during economic crises.
2. To examine the impact of financial flexibility on corporate performance during economic
crises.
3. To investigate the role of financial flexibility in promoting sustainable enterprise
development during the COVID-19 pandemic.
Research Questions:
1. To what extent does financial flexibility affect corporate investment decisions during
economic crises?
2. What is the impact of financial flexibility on corporate performance during economic
crises?
3. How does financial flexibility contribute to the sustainability of enterprise development
during the COVID-19 pandemic?
Reference:
1. Arslan-Ayaydin, Ö., Florackis, C., & Ozkan, A. (2016). Financial Flexibility, Corporate
Investment and Performance: Evidence from Financial Crises. Available at SSRN:
https://ssrn.com/abstract=2738244
2. Chen, S., Qiu, M., & Sun, B. (2019). Earnings quality and financial flexibility: A
moderating role of corporate governance. Journal of Applied Accounting Research, 20(4),
533-550.
3. Wang, Y., & Song, M. (2020). Corporate flexibility in a time of crisis: Evidence from the
COVID-19 pandemic. Journal of Corporate Finance, 65, 101813.
4. Dai, W., Zhu, Y., & Li, X. (2020). Research on the effect of enterprise financial flexibility
on sustainable innovation. Journal of Cleaner Production, 275, 123304.
5. Yang, H., & Wang, C. (2021). The Role of Financial Flexibility on Enterprise Sustainable
Development during the COVID-19 Crisis—A Consideration of Tangible Assets.
Sustainability, 13(2), 1007.