How Does Financial Flexibility Strategy Impact on Risk Management Effectiveness

Bibliographic Data

ID3221331
AuthorsQ K Nguyen (0000-0002-4683-2836, Ho Chi Minh City Open University, corresponding author)
Year2024
Volume14
Issue2
Publication date2024-04-01
Peer ReviewedYes
Open AccessYes
TypeARTICLE
VenueSAGE Open (JOURNAL)
Journal identifiersISSN: 2158-2440 • E-ISSN: 2158-2440
PublisherSAGE Publications Inc (PUBLISHER)
DOI10.1177/21582440241240842
OpenAlexW4396639125
LanguageEN
Citations received1
References cited49

In the context of emerging countries trying to attract foreign investors, building governance strategies and risk management of firms is an increasing concern. This study investigates the impact of financial flexibility strategies on the risk management effectiveness of firms and mechanism of these impacts by focusing on Vietnamese listed firms by applying the fixed effect and system GMM methods on a sample of 635 Vietnamese listed firms during the 2010 to 2021 period to derive empirical models under the high risk-high return approach. We also applied robustness tests to ensure that the results are reliable. We also investigate the level of risk management effectiveness among these firms during the 2010 to 2021 period. We found that financial flexibility strategies negatively impact risk management effectiveness of firms through reducing both firm risk and firm performance. Furthermore, we found that the degree of risk management effectiveness differs between low- and high-risk firms in Vietnam, with low-risk firms displaying more effective risk management compared to high-risk firms. Our research shows that financial flexibility strategies are not conducive to risk management effectiveness; however, firms can control the impact of flexibility strategies on risk management by controlling firm performance and risk. JEL Classification: G30, G32, G39

Business · Corporate governance · Economics · Financial risk management · Risk management · Vietnamese · Corporate Finance and Governance · Insurance and Financial Risk Management · Risk Management in Financial Firms · Finance

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Open DOIOpen Access