Izvorni znanstveni članak
https://doi.org/10.1080/1331677X.2020.1758588
Does earnings quality instigate financial flexibility? New evidence from emerging economy
Md Rashidul Islam
Man Wang
Muhammad Zulfiqar
Sadeen Ghafoor
Kuyon Joseph Bikanyi
Sažetak
Purpose: This research aims to examine the empirical relationship
between earnings quality and financial flexibility, i.e., how information
related to earnings affects firms’ cash levels in the emerging
economies.
Design/Methodology/Approach: To attain the research objectives,
we used panel data for 18 years (2000–2017) obtained from
the CSMAR database. Statistical software STATA used for data
analysis. Descriptive, multiple correlations, and unbalanced panel
data analysis are used.
Findings: Our empirical results negate the works conducted on
the advanced economy showing that information related to earnings
(Earnings Quality) is negatively associated with firms’
Financial Flexibility irrespective of firms’ characteristics, i.e., firms
with profit or loss and firm’s with R&D or without R&D expenditure.
However, the firm’s earnings quality, firm size, cash flows,
financial constraints, dividends, and growth are the dominant predictor
of financial flexibility. Moreover, the degree of dominance
depends on the firm’s specific characteristics.
Research Limitations/Implications: This research has been conducted
on the emerging Chinese market. For consistent and
robust results, this research excluded the financial and other firms
that possess different operational and regulatory attributes than
the manufacturing firms. The study is useful for policymakers and
managers to design their cash levels and avoid the hurdle of
external finance or to accelerate their flexibility to raise money
from an external source.
Originality/Value: Previous research addressed the issue related
to cost and benefit, information asymmetry, ownership concentration,
and firm’s propensity to cash holdings. A very little research
conducted with earnings quality and cash holdings in the developed
market (in Europe and the USA), and thus, for the first time,
we address the issue of earnings quality and financial flexibility in
the emerging economy.
Ključne riječi
Earnings quality; financial flexibility; cash holdings; emerging economy
Hrčak ID:
254495
URI
Datum izdavanja:
9.2.2021.
Posjeta: 616 *