The impact of financial flexibility on capital structure decisions: Some empirical evidence

This paper presents an empirical investigation to study the effect of financial flexibility on capital structure decisions on selected firms listed in Tehran Stock Exchange over the period 2006-2018. The results indicate that the cash value of the previous years had no meaningful relationship with the current year's financial leverage, which suggests that flexibility in previous years could not explain the financial leverage of the coming years and financial leverage of companies changes did not occur based on the past years performance. When the ultimate value of financial flexibility is high, the im-pact of different variables, for example, profits, depreciation, and depreciation costs, fixed assets, etc., on leverage is of little importance, with a slight change in leverage. Companies with a high final value of financial flexibility are willing to maintain their current debt capacities, but it is significantly possible that they target deliberate or temporary deviations from their leverage ratios