Employee Welfare, Financial Slack, and Corporate Risk: Evidence from Vietnam's Retail Industry

Abstract

It is in this context of a highly competitive business environment in Vietnam that this study aims to create an understanding of whether investment in employee welfare is an effective risk management tool and its effectiveness in relation to some corporate conditions. As a method to answer this question, the article uses 29 listed retail companies' panel data during 10 years between 2015 and 2024 (including 256 firm-year observations) and uses a Fixed Effects Model (FEM) including an interaction term. The analysis shows that the direct, statistically significant effect of welfare investment on corporate systematic risk is zero (β = 0.083; p > 0.10). Nevertheless, the essence and the most valuable message of the study is that fiscal slack is a moderating factor, as it considerably increases the risk-reducing impact of welfare policies. This is revealed by the negative and significantly (having a high level of statistical significance) negative coefficient of the interaction between welfare and slack (β = -0.953; p < 0.01). It is worth noting that, in further analysis, this mechanism can be effective only in the category of large-scale enterprises. In the academic field the research elucidates the boundary conditions of welfare-risk relationship that indicates that it is a contingent strategy and not a universal rule. Practically, the conclusions suggest that welfare expenditure is only useful as a risk management tool when tactfully used when in a position of financial strength, which is quite applicable to large businesses.