Financial Slack and Firm Performance: Evidence from Africa

1
Demis Hailegebreal Hailu
Demis Hailegebreal Hailu PhD candidate, Lecturer
2
Man Wang
Man Wang
3
Abdurahman Aliyi Ibrahim
Abdurahman Aliyi Ibrahim
4
Misraku Molla Ayalew
Misraku Molla Ayalew
1 Dongbei University of Finance and Economics

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Financial Slack and Firm Performance: Evidence from Africa Banner

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The objective of our study was to evaluate, in a population of Togolese People Living With HIV(PLWHIV), the agreement between three scores derived from the general population namely the Framingham score, the Systematic Coronary Risk Evaluation (SCORE), the evaluation of the cardiovascular risk (CVR) according to the World Health Organization.
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This study explores the relationship between financial slack and firm performance using a sample of firms in African countries. This study employed a split sample analysis to unmask the real picture of slack and performance nexus. We also used a baseline sample (using 923 firms) analysis to show how the result is ambiguous. By using 530 African firms (212 high and 318 low financial firms), this study found that while high available slack has adverse effects, low available slack has a favourable impact on firm performance. However, the study confirms while high potential slack has a positive influence, low potential slack hurts African firms’ performance. These results depicted that while agency theory offers a strong prediction when dealing with high available slack, the resource-based theory provides a reliable forecast when dealing with high potential slack. This study finally suggests the application of split-sample analysis in studies like this.

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Funding

No external funding was declared for this work.

Conflict of Interest

The authors declare no conflict of interest.

Ethical Approval

No ethics committee approval was required for this article type.

Data Availability

Not applicable for this article.

Demis Hailegebreal Hailu. 2020. \u201cFinancial Slack and Firm Performance: Evidence from Africa\u201d. Global Journal of Management and Business Research - C: Finance GJMBR-C Volume 20 (GJMBR Volume 20 Issue C4): .

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GJMBR Volume 20 Issue C4
Pg. 33- 62
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Crossref Journal DOI 10.17406/GJMBR

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September 22, 2020

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This study explores the relationship between financial slack and firm performance using a sample of firms in African countries. This study employed a split sample analysis to unmask the real picture of slack and performance nexus. We also used a baseline sample (using 923 firms) analysis to show how the result is ambiguous. By using 530 African firms (212 high and 318 low financial firms), this study found that while high available slack has adverse effects, low available slack has a favourable impact on firm performance. However, the study confirms while high potential slack has a positive influence, low potential slack hurts African firms’ performance. These results depicted that while agency theory offers a strong prediction when dealing with high available slack, the resource-based theory provides a reliable forecast when dealing with high potential slack. This study finally suggests the application of split-sample analysis in studies like this.

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Financial Slack and Firm Performance: Evidence from Africa

Demis Hailegebreal Hailu
Demis Hailegebreal Hailu Dongbei University of Finance and Economics
Man Wang
Man Wang
Abdurahman Aliyi Ibrahim
Abdurahman Aliyi Ibrahim
Misraku Molla Ayalew
Misraku Molla Ayalew

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