Coyle has signed a 2½-year contract at the Reebok Stadium and, with Saturday's game at Sunderland postponed, will take charge of his new team for the first time against Arsenal next weekend.
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Coyle, who spent two of the 23 years of his playing career at Bolton, had been placed on gardening leave by Burnley. "I'm absolutely delighted to be back at Bolton Wanderers," said Coyle, 43. "I look forward to the opportunity of bringing the good times back to the club for everyone."
Flood admitted he felt Bolton represented a step down for Coyle. "There was a factual analysis of the two clubs," said Flood.
"They have got a bank debt of £44 million, we have got none. They do not have a history of spending a lot of money over the last few years. I think they can say lots of tempting things to attract Owen in but whether they will deliver on those, I think history will tell."
Burnley are not likely to panic in replacing Coyle the club are believed to be targeting Simon Grayson, of Leeds, and Swansea's Paulo Sousa - with Steve Davis, the first-team coach and caretaker manager, seen as a more than able stand-in.
Graham Alexander, the Burnley captain, admitted Coyle's former charges were "disappointed" at his departure. "I am gutted he has gone," he said.