Operational Cost Management Efficiency and Economic Value Creation: The Mediating Role of Financial Flexibility in Nasdaq Listed Firms
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This paper investigates the influence of operational cost management efficiency on Economic Value Added (EVA) in 36 non-financial firms listed in the Nasdaq exchange through financial flexibility as a mediating variable. The empirical analysis is based on a balanced panel of 36 firms observed annually from 2020 to 2024 (yielding 180 firm-year observations). Principal component analysis is employed to generate the operational cost efficiency index and the financial flexibility index Fixed effects regression analysis and Sobel mediation test are used. It was found that operational efficiency significantly influences EVA positively (β=0.234, p<0.01) and financial flexibility positively (β=1.813, p<0.05); however, financial flexibility significantly influences EVA negatively (β=-0.008, p<0.05) demonstrating competitive mediation (mediation ratio 6.59%). Financial flexibility does not necessarily increase value since effective capital allocation is essential. Managers should adopt dynamic capital allocation strategies, set investment hurdle rates for excess liquidity, integrate EVA into performance evaluation and executive compensation systems, and optimize rather than maximize liquidity buffers by weighing their insurance value against opportunity costs. Large firms should decentralize decision-making and implement divisional EVA targets to mitigate organizational inertia.
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