The Impact of Financial Flexibility on the Resilience of Small and Medium Enterprises in the Face of Economic Shocks
Keywords:
Financial Flexibility, Economic Shock, Financial Resilience, Small and Medium Enterprises, SMEAbstract
Given the global economic instability and the increasing intensity of economic shocks, assessing and enhancing the financial resilience of small and medium-sized enterprises (SMEs) has become one of the main priorities for policymakers and economic researchers. This study was conducted with the aim of examining the impact of financial flexibility on the resilience of SMEs when confronted with economic shocks. The research employed a quantitative approach and utilized a mixed-methodology design. The statistical population included 120 Iranian SMEs in the manufacturing, service, and commercial sectors in the year 2024, from which 30 companies were selected as a sample using stratified random sampling and Cochran’s formula. The data collection tool was a researcher-made questionnaire comprising 30 items based on a Likert scale. The content validity of the questionnaire was confirmed by expert judgment, and its reliability was verified with a Cronbach’s alpha coefficient of 0.89. Data were analyzed using structural equation modeling in SmartPLS software after assessing normality through the Kolmogorov-Smirnov test. Model fit was evaluated using indices such as GFI, NFI, CFI, TLI, and RMSEA, and the significance level of path coefficients was tested through the Bootstrap method with 5000 random samples. This study investigated three main variables: financial flexibility, financial resilience, and economic shocks. Financial flexibility had a positive and significant effect on financial resilience (β = 0.72, p = 0.001). Financial resilience played a significant role in reducing the negative impacts of economic shocks (β = -0.38, p = 0.002). Economic shocks had a negative and significant effect on financial flexibility (β = -0.45, p = 0.003), indicating the vulnerability of companies to economic fluctuations. The analysis of factor loadings showed that indicators such as liquidity (λ = 0.85), financial stability (λ = 0.80), and exchange rate volatility (λ = 0.90) played a key role in measuring latent variables. Model fit indices were also at an acceptable level (CFI = 0.97, RMSEA = 0.05), confirming the validity and reliability of the model. The findings of this study highlight the importance of enhancing financial flexibility as a strategy to improve financial resilience and mitigate the adverse effects of economic shocks.
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