The Impact of Information Asymmetry and Liquidity Risk on Financial Flexibility: A case study of selected Corporations of Tehran Stock Exchange

The present study is examining the impact of information asymmetry and liquidity risk on financial flexibility of the selected corporations listed in Tehran Stock Exchange. The present research is applied in term of its endeavor and also sectional as it is based on time. The quantitative data is used and the research design is descriptive and causal as it is examining the relationship between variables such as information asymmetry, liquidity risk and financial adaptability. For the study 148 listed corporations of Tehran Stock Exchange has been selected for the study and have been studied between year 2012 to year 2016. In the research, information asymmetry and liquidity risk of stock are independent variables and their effects on financial flexibility as the dependent variable in the form of regression model based on paneling data have been experimentally tested. The research conclusions indicate that information asymmetry has negative yet significant impact on financial flexibility while liquidity risk of stock has significant positive consequence on financial flexibility. All together effect of information asymmetry and liquidity risk variables on financial flexibility is negative and yet significant. Eventually, on the basis of conclusions inferred from tests of hypotheses, it can be suggested that managers should perform suitable functions such as; appropriate disclosure, accuracy of financial structure, supplement of suitable financial support and reducing unsuitable conservation. With the help of above mentioned actions, domain difference of sale and buy bid price and risk of stock liquidity will decrease which will lead to more financial flexibility. Moreover, it is suggested that investors should look into extent of risk liquidity of stock in while making investment and they should avoid investment when the difference of sale and buy price is higher than the corporation buying stock.