This study aims to investigate the impact of financial slack on firm performance in Indian Companies in light of two competing theories of corporate finance. By investigating a panel data set of 283 Indian firms over the period of 5 years, the empirical results of ordinary least squares and fixed-effects regression analysis confirmed a significant negative linear relationship between available slack and firm performance. In addition, we found a positive relationship between potential slack and firm performance. Moreover, the results of the study lend support to the agency theory of finance.
Financial slack, Firm performance, Agency theory, Panel data, India.
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