The Role of Financial Flexibility in the Financial Performance of the Automobile Sector: Asian Perspective

Abstract

In the corporate sector, financial managers emphasize the importance of Financial Flexibility in the company's financial operations which enables the company to navigate uncertainties effectively. The purpose of this study is to examine the role of financial flexibility in the financial Performance of the automobile sector Asian perspective from 2013 to 2022. Three different measures of financial flexibility were used in this study net cash flows, market capitalization, and degree of financial leverage. This study used the two-step system Generalized Method of Moments (GMM) dynamic panel estimator for empirical testing of the hypothesis by using secondary data from 19 listed automobile companies to investigate the performance of firms. The results of this study show that the degree of financial leverage significantly negative impact on Investment activities and Tobin Q along with the background theories like Trade-off theory and Theory of investment and there is a positive impact of the degree of financial leverage on return on assets. This study recommends that policymakers and corporate managers seek to reduce the risk of financial distress and improve financial performance.