The influence of the financial slack on the economical performance of Brazilian and Chilean companies

The influence of the financial slack on the economical performance of Brazilian and Chilean companies

  • Jaime Dagostim Picolo, Cristian Baú Dal Magro, Tarcísio Pedro da Silva, Luciano Bernardo ,

Abstract

Although financial slack is a resource used to generate opportunities, a high level of this may lead to a more relaxed or complacent management. Taking into account this divergence, the present study examines the influence of financial slack on economic performance. The study involved 190 companies in Brazil and 104 in Chile. The results indicate that in Brazil and Chile, the gross profit showed better explanatory power to the financial slack resources. However, the high discretionary financial slack showed negative magnitude and a positive link with the financial resources demand, suggesting that companies become proactive in new investments and in strategic choices when there is a demand for financial resources.

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