Financial flexibility and investment efficiency: The moderating role of board financial expertise

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The environment for enterprise external financing has deteriorated recently, especially in the wake of the COVID-19 outbreak, which has severely restricted enterprise external financing options. Therefore, it is essential to implement efficient financial methods to encourage business growth. This paper intends to investigate the moderating effect of board financial expertise on the relationship between flexibility and investment efficiency of listed companies in Egypt. This study includes moderator and control variables to produce an empirical model and findings that are more reliable based on 592 sample observations collected as annual secondary data from 2014 to 2021. Generalized least squares, logistic regression, and panel-corrected standard error were employed in the analysis. Results indicate that a higher board financial expert’s ratio decreases investment efficiency and has a moderating effect on financial flexibility and investment efficiency. High proportions of flexibility affect investment efficiency. Robustness checks confirm the negative effect of board financial expertise on the relationship between flexibility and investment efficiency. In unpredictable times, financial flexibility can help firms meet capital needs and boost the effectiveness of their investment decisions. Therefore, to increase investment efficiency and support firm growth, firms should maintain their financial flexibility while tightening internal controls.

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    • Figure 1. Association between financial flexibility and over-investment
    • Table 1. Industries pertinent to the sample
    • Table 2. Measurements of variables
    • Table 3. Descriptive statistics
    • Table 4. Correlation matrix
    • Table 5. Diagnostics check
    • Table 6. Regression analysis with PCSE & GLS
    • Table 7. Financial flexibility effect with PCSE and GLS
    • Table 8. Robustness test by using logistics regression
    • Conceptualization
      Mohamed Rezk Omara
    • Data curation
      Mohamed Rezk Omara
    • Formal Analysis
      Mohamed Rezk Omara
    • Funding acquisition
      Mohamed Rezk Omara
    • Investigation
      Mohamed Rezk Omara
    • Methodology
      Mohamed Rezk Omara
    • Validation
      Mohamed Rezk Omara
    • Visualization
      Mohamed Rezk Omara
    • Project administration
      Ahmed Rashed
    • Resources
      Ahmed Rashed
    • Software
      Ahmed Rashed
    • Supervision
      Ahmed Rashed
    • Writing – original draft
      Ahmed Rashed
    • Writing – review & editing
      Ahmed Rashed