Empirical Evidence on the U-shaped Nexus between Firm Slack and Future Profitability: The Moderating Role of Corporate Life Cycle

نوع المستند : المقالة الأصلية

المؤلفون

1 قسم المحاسبة كلية التجارة جامعة بنها

2 قسم المحاسبة كلية التجارة جامعة المنوفية

المستخلص

Purpose: The current study mainly aims to examine the linear impact of firm slack on future profitability and the U-shaped nexus between firm slack and future profitability. Further, the current study seeks to investigate the moderator role of corporate lifecycle among these variables.

Design/methodology/approach: This current study uses a quantitative research method to achieve its objectives depending on (104) firms of Egyptian-listed firms from 2015 to 2022, using the Generalized Least Squares (GLS) and U-shaped test in Stata/IC15 to test the hypotheses.

Findings: The findings reveal that firm slack had a significant linear impact on future profitability as absorbed slack has a significant negative impact on future profitability, while unabsorbed and potential slack has a significant positive impact on future profitability. Also, the results indicate that there is a U-shaped nexus between firm slack and future profitability as absorbed slack has a significant U-shaped nexus with future profitability, whilst unabsorbed and potential slack have a significant inverted U-shaped nexus with future profitability. Moreover, the maturity, shake-out, and decline phases of the corporate life cycle have a moderator role in the linear impact of firm slack (absorbed, unabsorbed, and potential) on future profitability and the U-shaped nexus among these variables. In contrast, the introduction and growth phases of the corporate life cycle moderate the linear impact of firm slack (absorbed, unabsorbed, and potential) on future profitability; however, they do not moderate the U-shaped nexus among these variables.

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