The Impact of the Value of Financial Flexibility on Corporate Financial Policies And The Cost of Equity Capital Using by Gamba and Traintis Model

Financial flexibility is one of the key factors in making decisions about the Company's financial policeis. In this paper, proposed a novel approach to measure the value a firm's shareholders attribute to its financial flexibility. And examined the relationship between financial flexibility and financial policies, including dividends, capital structure and cash holdings as well as the cost of equity capital. The sample of this study consists of 84 companies listed in Tehran Stock Exchange for the period 2007 to 2014 (1386 to 1393 Iranian calendar). In this study, the model developed by Gamba and Triantis ]12[ has been used as financial flexibility criteria. Financial flexibility is calculated using four factors: Growth opportunities, profitability, cost of external financing and Reversibility of capital. To test the hypothesizes, multivariable regression model to panel data and logit model was used. The result of this study shows, there is negative and meaningful relationship Between financial flexibility and Debt leverage and cost of equity capital, In addition to cash holdings is a significant and positive impact. It also has no significant impact between financial flexibility and decisions of division.