Financial flexibility, corporate governance, and enterprise value among A-share listed companies in China

Abstract

This study aimed to determine the financial flexibility, corporate governance, and enterprise value among A-share listed companies in China from 2011 to 2020. This descriptive-correlational research involved 365 A- share listed companies in China. The study utilized secondary data collected from Wind and CSMAR databases. Data collected were processed and statistically analyzed using the STATA15.0. Study results revealed that, overall, the level of financial flexibility was not high. Specifically, cash flexibility was also not high, and with some A-share listed companies reserve debt flexibility. In terms of corporate governance, more than half of the companies had low internal governance, and nearly half of the enterprises had moderate external governance. Based on Tobin’s Q value, taken as an entire group, Chinese A-share listed companies were able to achieve their asset preservation and appreciation goals and the market value of most Chinese A-share listings was low. In terms of ROA, the overall profitability of Chinese A-share listed companies was not high, of which, majority had moderate ROA. On the whole, the ROE was not high, but most companies registered high ROE. Furthermore, financial flexibility had a positive promoting effect on enterprise value. Finally, the improvement of the external governance environment was conducive to the improvement of ROA and ROE; hence, as the level of internal governance improves, the ROE likewise improves.