Experts has a new look! Let us know what you think of the updates.

Provide feedback
Home
Scholarly Works
Operating flexibility and optimal capital...
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