Multidimensional Index of Financial Flexibility Assessment

Document Type : Research Paper

Authors

1 Ph.D. Candidate, Department of Accounting, Tabriz Branch, Islamic Azad University, Tabriz, Iran.

2 Associate Prof. Department of Accounting, Tabriz Branch, Islamic Azad University, Tabriz, Iran.

3 Assistant Prof, Department of Accounting, Tabriz Branch, Islamic Azad University, Tabriz, Iran.

10.22051/jfm.2020.30323.2327

Abstract

Evidence based on previous studies in measuring financial flexibility is primarily based on Western texts, which is not necessarily suitable for developing economies in countries such as Iran. Therefore, the purpose of the present study is to create an Adjusted and multidimentional Financial Flexibility Index (FFI) to reflect the current characteristics of the Iranian Stock Exchange. To this end, we follow the research of Gamba and Triantis (2008), Rap et al. (2014) and Chang and Ma (2018) attempted to present a model of financial flexibility as a hybrid index and based on the experts' viewpoints, the weight of the composites could be determined. This research has been carried out in two basic stages. In the first stage, the indicators of financial flexibility were extracted using the library methodو Then, for validation and evaluation of these indices, which are appropriate to the Iranian financial market, these indicators were weighted using AHP (hierarchical analysis) technique by a sample of 15 academic experts and then by coefficient of variation. The results obtained from the consensus of experts in the field of weighting the indices showed that in the hybrid model of financial flexibility extracted first the cash holdings, second the ability to finance, third the cost of financing and fourth the financial constraint have priority in weights. According to the results, the hierarchical theory of capital structure is implemented in the Iranian environment and according to experts, because the multidimensional index of financial flexibility extracted indicates this.

Keywords

References

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Financial Management Strategy
Volume 11, Issue 4 - Serial Number 43
December 2023
Pages 173-196

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History

  • Receive Date: 16 February 2020
  • Revise Date: 04 July 2020
  • Accept Date: 13 November 2023

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