The Role of Price Informational Efficiency in the Relationship between Financial Flexibility and Firms’ Access to Financing

Abstract

The purpose of this study is to examine the role of financial flexibility in firms’ financial development, with an emphasis on the moderating effect of the speed of information incorporation into stock prices in the Iranian capital market. The research data comprise 1,017 firm-year observations from 113 companies listed on the Tehran Stock Exchange over the period 2015 to 2023, selected using a systematic elimination sampling method. To test the research hypotheses, multivariate regression models and correlation analysis were employed, and financial flexibility and financial development were measured using accounting and financial indicators. The findings indicate that financial flexibility has a positive and statistically significant effect on financial development, and that this relationship is strengthened as the speed of information incorporation into stock prices increases. In other words, in firms where financial information is reflected more rapidly in stock prices, the impact of financial flexibility on financial development is more pronounced. These results highlight the importance of combining flexible financial management with an efficient information environment in promoting firms’ financial growth and development, and they can serve as a guide for decision-making by financial managers, investors, and capital market analysts in Iran.