Does Operating Flexibility Improve Firm Investment Efficiency? Evidence from China

Employing a sample of listed Chinese firms, this study investigates whether operating flexibility improves investment efficiency. The findings indicate that greater operating flexibility improves investment efficiency. Moderation analyses further indicate that this effect is more pronounced for firms facing higher financing costs, higher credit risk, and greater environmental uncertainty. Additional tests further reveal that the efficiency gains associated with flexibility are concentrated among firms with weaker implicit government guarantees and firms headquartered in more economically developed regions. Overall, the findings identify operating flexibility as an important internal adjustment capability that helps firms improve capital allocation in emerging markets.

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Publication Details

Journal
Emerging Markets Finance and Trade
Published
2026-09-28
DOI
https://doi.org/10.1080/1540496x.2026.2698619
Primary Topic
Corporate Finance and Governance
Type
article
Field-Weighted Citation Impact
0.00
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article

Does Operating Flexibility Improve Firm Investment Efficiency? Evidence from China

Yang Liu, Lingmin Xie, Yingdong Liu, Donghui Li et al.
Emerging Markets Finance and Trade
Corporate Finance and Governance
article

Does Operating Flexibility Improve Firm Investment Efficiency? Evidence from China

Yang Liu, Lingmin Xie, Yingdong Liu, Donghui Li, Chu’an Cai
article en

Abstract

Employing a sample of listed Chinese firms, this study investigates whether operating flexibility improves investment efficiency. The findings indicate that greater operating flexibility improves investment efficiency. Moderation analyses further indicate that this effect is more pronounced for firms facing higher financing costs, higher credit risk, and greater environmental uncertainty. Additional tests further reveal that the efficiency gains associated with flexibility are concentrated among firms with weaker implicit government guarantees and firms headquartered in more economically developed regions. Overall, the findings identify operating flexibility as an important internal adjustment capability that helps firms improve capital allocation in emerging markets.

Emerging Markets Finance and Trade
Shenzhen University (CN)
Openalex Percentile: Top 4%
Corporate Finance and Governance
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