The purpose of this study is to investigate on factors that would influence on Korean universities’ formation of slack resources which are saved against future financial risks. In general, an organization's slack resource is known as the safety mechanism to cope with any possible financial risks in the future, which gets many scholars’ attention to study on it. There have been relatively many previous studies on the slack resource of governments or firms. However, research on that of university level have rarely been found especially in Korea because university foundations (or owners) hardly invest in their universities so that excessive slack resources can be considered as a part of current tuition savings. In other words, enrolled students are more likely to receive educational services that do not meet their tuition fees.
Despite considerable interest in the level and nature of university’s slack resource, there has been only little academic research in this area. Since there have been very few studies that systemically analyzed the cause and reasons for universities’slack resources, our study will mainly focus on the structural determinants of slack resources by examining data collected from FY2013~FY2015 budget and settlement reports of Korean universities.
In any organization, it is a natural phenomenon that makes consistent underestimation of revenue forecast to form excess resources (Voorhess, 2006). Hendrick (2006) also points out that an organization’s under-forecasting of revenue is one of the most important factors to form slack resources. Besides under-forecasting managerial practice, this study considers various variables such as the governmental grant, budget management practice, and volatility of revenues to find out crucial factors influencing on a university’s slack resources.
The procedure for this research is as follows: First, we investigate whether the level of university’s slack resource is enough or too high to cope with its financial risks. Second, based upon the findings from the first stage,this study will be focused on the Korean universities’ strategy to save and maintain slack resources at the desirable level.
The finding of this study is expected to contribute further understanding of the financial management practice in private universities.