How does the economic policy uncertainty affect the relationship between financial slack and firm performance in emerging countries?

Abstract

This study investigates the moderating effect of economic policy uncertainty (EPU) on the relationship between slack resources and firm performance in emerging countries. By using 47,523 firm‐year observations from seven emerging market economies through the period of 2010–2018, the results show an inverse U‐shaped relationship between slack resources and firm performance. The findings also demonstrate that EPU acts as a negative moderator for the slack–performance relationship. In high EPU environments, the marginal benefit from one additional unit of slack is smaller relative to low EPU environments. This study contributes to the slack resources‐firm performance literature by emphasizing the role of the broader external environment as a moderator.

Artificial Intelligence and Green Total Factor Productivity: The Moderating Effect of Slack Resources

“…Resource buffers can enhance operational resilience and aid in resisting vulnerability to ensure sustainable development [31], especially in complex and unstable markets and institutional environments where slack resources are of great importance [32]. Studies show that slack resources are beneficial for enterprises in improving their strategic capabilities, seizing new opportunities for development [33], facilitating their entry into new market areas, and providing more freedom for strategic exploration and innova-tion [34]. AI applications are typical technological innovations and provide a new path for enterprises to explore green and sustainable development.…”