The Impact of Financial Flexibility on Enterprise Risk-Taking

Abstract

Economic globalization has made corporate risks complex and diverse. In recent years, the international economic environment and China's policy changes have prompted people to increase their risk awareness. Enterprise risk-taking is the fundamental driving force for economic growth and is vital to the survival and development of enterprises. Therefore, based on the theory of resource dependence, this paper takes the A-share listed non-financial enterprises in 2014-2018 as a sample and establishes a fixed-effect model to study the impact of financial flexibility on the enterprises risk-taking. The research finds that financial flexibility can significantly promote enterprise risktaking, in non-state-owned enterprises and agents. In enterprises with low conflicts, financial flexibility plays a more stronger role in promoting corporate risk-taking. The research in this paper not only enriches the relevant literature on financial flexibility and enterprise risk commitment, but also contributes to the financial resource reserve and risk commitment decision of the enterprise.

The nonlinear relationship between financial flexibility and enterprise risk-taking during the COVID-19 pandemic in Taiwan?s semiconductor industry

“…ERT refers to the analysis and choice of uncertain investment projects that can bring expected earnings and future cash flow, reflecting the willingness or commitment of enterprises to pay a high price to obtain high returns (Wiklund & Shepherd, 2005). ERT is a resource-consuming activity and as such, has a strong dependence on the enterprise's resources (Liu & Chang, 2019). Without resource support, ERT activities are difficult to maintain.…”

“…Without resource support, ERT activities are difficult to maintain. Therefore, the amount, quality, and acquisition ability of enter-prise resources will affect ERT behavior (Liu & Chang, 2019;Wang et al, 2019).…”

“…Based on the Resource Dependence Theory, Liu and Chang (2019) sampled the A-share non-financial enterprises listed on the Chinese Stock Exchange from 2014 to 2018, and established a fixed-effect model to study the impact of FF on ERT. The research found that FF can significantly promote ERT.…”

“…Enterprise risktaking (ERT) refers to a decision-making behavior orientation, which reflects the attitude of enterprise management toward 'risky' projects when making investment decisions. As the fundamental driving force of longterm sustainable economic growth, ERT is of great significance to the promotion of enterprise value and its social and economic growth as a whole (Acemoglu & Zilibotti, 1997;Liu & Chang, 2019). Faced with dynamic environmental changes, enterprises need to adopt a variety of methods to avoid risks.…”

“…For non-pandemic periods, there are several studies on the relationship between FF and ERT. Some studies report that FF positively influences ERT (Gu & Yuang, 2020;Liu & Chang, 2019;Wang & Shi, 2014;Zhang & Geng, 2018), whereas some articles suggest that FF has a negative influ-ence on the ERT Zhou L. B. et al, 2020). However, there is no empirical study to analyze whether FF can provide a competitive advantage for the semiconductor industry and how FF affects the ERT of semiconductor industry.…”