FINANCIAL MANAGEMENT PRACTICES AND ORGANIZATIONAL PERFORMANCE: INVESTIGATING THE MEDIATING EFFECT OF FINANCIAL FLEXIBILITY IN THE PAKISTANI SERVICE INDUSTRY

Abstract

The purpose of this study is to examine the mediating influence of financial flexibility in the link between financial management practices and business performance. The research focuses on businesses operating in Rawalpindi and Islamabad, Pakistan. The sample included 100 individuals from 22 industry groups. Using regression analysis, the study hypotheses were tested using a quantitative method. The purpose of the analysis was to assess the validity and dimensionality of the suggested research model. According to the findings, sound financial management techniques have a big influence on how well a company performs. In general, businesses that use sensible financial strategies are more likely to thrive in terms of stability and expansion. Financial flexibility, significantly, was discovered to improve the connection between financial management and performance. The need for flexible financial plans that can adjust to shifting economic circumstances is demonstrated by this. Organizations may take quick action, take advantage of possibilities, and lessen hazards thanks to their financial adaptability. Financial flexibility is identified as a key mediating variable in improving organizational outcomes in the research. When interpreting the results, though, there are a number of restrictions that must be taken into account. To begin, the cross-sectional approach of the study reduces its generalizability over time and restricts causal conclusions. Additionally, the comparatively limited sample size may not adequately reflect the wide range of organizational behaviors throughout the nation. The necessity for future research employing longitudinal data and larger sample sizes is implied by these limitations. The study nevertheless yields valuable lessons regarding financial planning and organizational efficiency, notwithstanding these limitations. This study fills a significant void in the Pakistani context, where there is not much empirical research on financial flexibility. It enhances comprehension of how flexible financial strategies may improve outcomes. The results have real-world implications for financial strategists, politicians, and managers in developing nations. This study offers a thorough examination of how financial flexibility contributes to an organization's overall success.