Journal article
Operating flexibility and optimal capital structure
Abstract
Abstract The effect of operating flexibility on leverage ratio is not clear, with papers pointing to both positive and negative relationships. Using production switching cost as a measure of operating flexibility, we show that it has two opposing effects: it increases firm value (positive) and increases cost of debt (negative), thus the overall effect is ambiguous. In general, however, the overall effect is negative and small in magnitude. It …
Authors
Charupat N; Sarkar S
Journal
Accounting and Finance, Vol. 65, No. 2, pp. 1863–1887
Publisher
Wiley
Publication Date
June 2025
DOI
10.1111/acfi.13391
ISSN
0810-5391