Abstract
Financial slack resources are unutilized assets and capabilities. According to Resource-Based View,
such resources are concealed energies and can boost the financial performance of an organization.
On the other hand, Agency theory believes that slack resources are redundant cost and need
minimisation. The present study investigates the influence of one of the corporate governance
factor—ownership structure as a moderating variable—on the relation between financial slack
(available and potential) and firm performance. The study expands the scope of agency theory to
incorporate the interest of owners. Dynamic generalized method of moments regression results
and fixed effects generalized least square results show a positive linear relationship between
financial slack and firm performance. Findings of study support Resource-based view and
behavioural theory of the firm. Moreover, the findings show that the identity of the owners
matters in shaping the relationship, high level of slack resources benefit firm, the level of slack is
important rather than fungibility of slack resources, who the owner is matters and, national
corporate governance system as well as firm-level corporate governance system influence
investment horizon of outside investors
Snober Javid, Irfan Saleem, Haq Nawaz Khan. (2020) Financial Slack and Firm’s Performance: Does Ownership Structure Matters?, Abasyn Journal of Social Sciences, Volume-13, Issue-1.
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