© 2018. Demis Hailegebreal Hailu, Man Wang, Misraku Molla Ayalew & Yidersal Dagnew Dinberu. This is a research/review paper, distributed under the terms of the Creative Commons Attribution-Noncommercial 3.0 Unported License http://creative commons.org/licenses/by-nc/3.0/), permitting all non-commercial use, distribution, and reproduction in any medium, provided the original work is properly cited. Financial Slack and Firm Performance in Africa: The Mediating Effects of the Banking Sector and the Stock Market Development By Demis Hailegebreal Hailu, Man Wang, Misraku Molla Ayalew & Yidersal Dagnew Dinberu Dongbei University of Finance and Economics Abstract- Organizational theory claimed favorable effect of slack on performance and the agency theory; supported an adverse influence of slack on performance. This study explored the association between the financial slack and the financial performance of firms in Africa. This study further rexamined the mediating effect of the banking sector and the stock market development on the slack-performance nexus. While the firm performance is measured as the return on assets (ROA), and return on sales (ROS), the slack components are categorized as available, potential and recoverable slacks. We used firm-level data from 457 firms in 13 African countries from 2006 to 2015. The finding of this study supported the organizational theory that favors a positive effect of slack on performance. The result of mediation analysis shows that both the banking sector and the stock market development have no strong mediating effect on the slack- performance relationship of firms in Africa. This study finally offers micro and macro level policy implications. Keywords: Africa, Banking sector development, Stock market development, Financial slack, Firm performance, Structural Equation Modelling. GJMBR-B Classification: JEL Code: M20 FinancialSlackandFirmPerformanceinAfricaTheMediatingEffectsoftheBankingSectorandtheStockMarketDevelopment Strictly as per the compliance and regulations of: Global Journal of Management and Business Research: B Economics and Commerce Volume 18 Issue 7 Version 1.0 Year 2018 Type: Double Blind Peer Reviewed International Research Journal Publisher: Global Journals Online ISSN: 2249-4588 & Print ISSN: 0975-5853