The Moderating Impact of Firm Characteristics on Free Cash Flows and Financial Performance: Evidence from Pakistan Stock Exchange

  • Aqsa Suleman Bahria University, Islamabad
  • Shahzad Butt Assistant Professor, Bahria University, Islamabad
  • Tehsin Ahmad Department of Business Administration, Assistant Professor (Retd), Iqra University Islamabad, Pakistan
Keywords: Firm Age, Firm Size (FS), Free Cash Flows (FCF), Firm Performance (FP), Pakistan Stock Exchange (PSX)


This study aims to discover effect of firm characteristics on the linkage of free cash flows and firm financial
performance. Precisely, the current study has two main objectives: first, to setup the relationship between
free cash flows and financial performance of non-financial firms; secondly, to investigate the moderating
impact of firm characteristics of this relationship. The firm characteristics considered in this study are firm
size and age. The study used secondary panel data which was obtained from 95 non-financial firms
registered at PSX for the period of 2009-2019. Regression analysis was used in data evaluation. Results
pointed out that free cash flows have substantial positive effect on financial performance, while firm'
characteristics have a negative significant moderating effect on this relationship. The key academic input of
the study is that free cash flows have a positive statistically significant effect on financial performance. The
study suggests that firm managers, shareholders, and practitioners should focus more on the need for firms to
generate more FCF.”