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

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.”