Does Slack Buffer? Market Performance after Environmental Shock

Slack is a resource held by firm but exceeds its needs. It crucial for to raise more attention on slack when facing environmental shocks, which are one of the causes unsustainability. Based agency theory and behavioral theory, this paper analyzes buffer effect market performance under different periods degrees shocks. Taking two major earthquakes that occurred in China as natural experimental background listed firms hit areas sample, we find shock exposed acts positive contingency impact unabsorbed performance, negative absorbed slack’s effect. The severity promotes act immediate post-shock period during-shock period. These findings contribute answering question how configure protect even achieve sustainable development shock.