A bird in the hand is better than two in the bush: Investigating the relationship between financial slack and profitability in business groups

Using arguments from the behavioral theory of the firm, agency theory, and the literature on internal capital markets, this article investigates the relationship between financial slack and firms’ profitability in standalone versus business group–affiliated firms. Using a large sample of French privately held firms, we show that there is a quadratic, inverse U-shape relationship between financial slack and profitability for privately held firms. We observe that the relation is steeper for business group affiliated firms than for standalone firms, which is consistent with the idea that firms in business groups are in competition for the business groups resources. Moreover, we explore whether business groups characteristics and position and weight of a given affiliated firm in the business group organization influence the impact of financial slack on profitability. Our results show that for firms that are closest to the business group head firm and that have a higher weight in the business groups, the quadratic, inverse U-shaped relationship is steeper. These findings suggest that the bargaining power that firms have in business groups plays an important role in explaining the relation between financial slack and profitability. JEL CLASSIFICATION: G32, L22 and L25.

Application of Corporate Social Responsibility -- Taking Chinese Listed Companies in the COVID-19 as an Example

This study focuses on a sample of Chinese listed companies from 2019 to 2020 to explore the relationships among corporate social responsibility, financial constraints, and financial performance. In addition, we discuss five factors affecting financial constraints. We also analyze the types of enterprises that can improve their financial performance by implementing corporate social responsibility keeping in mind the factors that lead to a high degree of financial constraint. The results indicate that: 1. The degree of financial constraints has a negative and significant impact on financial performance; 2. There is a reverse relationship between the degree of financial constraints and the effectiveness of corporate social responsibility measures; 3. Enterprises with high financial constraints (due to lower financial slack and revenue growth rates) can significantly improve their financial performance through the implementation of effective corporate social responsibility programs. 4. Enterprises with high financial constraints, caused by financial slack and revenue growth rate, can significantly improve their financial performance by implementing corporate social responsibility programs.

Can Workplace Financial Counseling Help Lower-Income Workers Improve Credit Outcomes?

Financial counseling has been found to be effective in improving consumers' credit outcomes and could be expanded through the workplace to reach lower-income workers who struggle with various financial challenges. We examine engagement and credit outcomes associated with a workplace financial counseling program offered to 2,849 frontline workers in New York City. Age and credit scores helped explain variation in types of engagement in services. Credit outcomes were modest on average, but greater among workers who received three or more counseling sessions, had low and no baseline credit scores, and reduced the number of delinquent and collections accounts on their credit reports. Workplace financial counseling is a promising strategy to proactively promote credit outcomes among frontline workers, though counselors should be flexible in offering services and help workers access affordable credit products available to those with subprime credit scores and increase financial slack to lessen dependence on credit.

The Implications of Organizational Slack-Resources Heterogeneity toward CSR Expenditures

Research aims: This study aims to prove the alleged effect of organizational resource slack on corporate social responsibilities (CSR) expenditures. The types of organizational resource slack examined in this study were financial slack, human resource slack, and innovational slack. This research was conducted in the mining sector and basic and chemical industries listed on the Indonesia Stock Exchange during 2015-2019.Design/Methodology/Approach: Non-probability sampling technique with purposive sampling method was as the sampling method. It consisted of 13 companies with a total of 54 samples of observations. Hypothesis testing used multiple linear regression.Research findings: The results showed that financial slack had a negative effect on CSR expenditures. It supports agency theory used as a theoretical basis regarding management's tendency to manage slack over organizational resources. However, this study could not show the effect of human resource slack and innovational slack on CSR expenditures.Theoretical contribution/Originality: This study's results constitute empirical evidence related to agency theory explaining the effect of financial slack on CSR expenditures.Practitioner/Policy implication: This study’s results can illustrate the management’s tendency to allocate funds for CSR by considering the slack of various types of organizational resources. Improvements related to the implementation of Law No. 40 of 2007 about the responsibility of limited liability companies to carry out social and environmental responsibility also need to be concerned by the regulator.Research Limitation/Implication: The limitations in this study that can be considered for future research are related to very limited research data for certain variables. The data’s availability related to CSR costs and research and development costs included in the annual report is very limited, so the number of samples processed was limited.

Corruption and SME growth: the roles of institutional networking and financial slack

In this study, we investigate the mediating effect of institutional networking on the relationship between perceived corruption and the growth of small and medium-sized enterprises (SMEs). We also examine the moderating impact of financial slack on the relationship between perceived corruption and institutional networking. We test our moderated mediation model using data from 212 SMEs operating in Ghana. The findings from the study show that perceived corruption is positively related to institutional networking and this relationship is amplified when levels of financial slack are greater. The findings also show that institutional networking positively mediates the relationship between perceived corruption and SME growth. Theoretical and practical implications are discussed.