IDEAS home Printed from https://ideas.repec.org/a/gam/jsusta/v16y2024i6p2573-d1361046.html
   My bibliography  Save this article

How Financial Inclusion Moderates the Curvilinear Nexus between Tangible Investment and Sustainable Firm Growth: New Evidence from the Middle East and North Africa Region

Author

Listed:
  • Wafa Khémiri

    (Department of Finance, École Supérieure de Commerce de Tunis, Campus Universitaire Manouba, University of Manouba, LARIMRAF LR21ES29, Manouba 2010, Tunisia)

  • Eman Fathi Attia

    (Accounting Department, College of Business and Administration, University of Business and Technology, Jeddah 21448, Saudi Arabia
    Accounting and Finance Department, College of Business and Technology, Arab Academy for Science & Technology and Maritime, Cairo P.O. Box 1029, Egypt)

  • Ahmed Chafai

    (Department of Economics, École Supérieure de Commerce de Tunis, Campus Universitaire Manouba, University of Manouba, ThÉMA LR16ES10, Manouba 2010, Tunisia)

Abstract

The aim of this study was to examine the curvilinear relationship between tangible investment and sustainable firm growth in the MENA region, as well as the moderating role of financial inclusion on this connection. To achieve this, we selected a sample of 465 firms over the period 2007–2020. Employing a system GMM model for the empirical analysis, the findings reveal that there is a curvilinear (inverted U-shaped) nexus between tangible investment and sustainable firm growth. Moreover, this study employs a moderating effect model to demonstrate that financial inclusion can enhance sustainable firm growth. The system GMM model further indicates that financial inclusion moderates the curvilinear relationship between tangible investment and sustainable firm growth. This study offers valuable insights for strategic firm planning and policy development, highlighting the role of financial inclusion in promoting firm sustainability.

Suggested Citation

  • Wafa Khémiri & Eman Fathi Attia & Ahmed Chafai, 2024. "How Financial Inclusion Moderates the Curvilinear Nexus between Tangible Investment and Sustainable Firm Growth: New Evidence from the Middle East and North Africa Region," Sustainability, MDPI, vol. 16(6), pages 1-27, March.
    • Handle: RePEc:gam:jsusta:v:16:y:2024:i:6:p:2573-:d:1361046
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/2071-1050/16/6/2573/pdf
    Download Restriction: no
    File URL: https://www.mdpi.com/2071-1050/16/6/2573/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Bronwyn H. Hall & Jacques Mairesse & Benoit Mulkay, 1998. "Does cash flow cause investment and R&D: an exploration using panel data for French, Japanes and United States scientific firms," IFS Working Papers W98/11, Institute for Fiscal Studies.
    2. Bradley, Michael & Jarrell, Gregg A & Kim, E Han, 1984. "On the Existence of an Optimal Capital Structure: Theory and Evidence," Journal of Finance, American Finance Association, vol. 39(3), pages 857-878, July.
    3. Kien, Pham Van & Ou, Jenho Peter & Sadiq, Dr Muhammad & Nguyen, Tran Thai Ha & Huy, Pham Quang & Tran, Trung Kien, 2023. "What role financial inclusion, green trade and natural resources utilization play in ASEAN economic growth: Evidence from post COVID era," Resources Policy, Elsevier, vol. 85(PB).
    4. Nasir Khan & Mahwish Zafar & Abiodun Funso Okunlola & Zeman Zoltan & Magda Robert, 2022. "Effects of Financial Inclusion on Economic Growth, Poverty, Sustainability, and Financial Efficiency: Evidence from the G20 Countries," Sustainability, MDPI, vol. 14(19), pages 1-19, October.
    5. Appiah-Otoo, Isaac & Chen, Xudong & Ampah, Jeffrey Dankwa, 2023. "Exploring the moderating role of foreign direct investment in the renewable energy and economic growth nexus: Evidence from West Africa," Energy, Elsevier, vol. 281(C).
    6. Chuka Ifediora & Kenechukwu Onochie Offor & Eze Festus Eze & Samuel Manyo Takon & Anthony Eboselume Ageme & Godwin Imo Ibe & Josaphat U. J. Onwumere, 2022. "Financial inclusion and its impact on economic growth: Empirical evidence from sub-Saharan Africa," Cogent Economics & Finance, Taylor & Francis Journals, vol. 10(1), pages 2060551-206, December.
    7. Jensen, Michael C, 1986. "Agency Costs of Free Cash Flow, Corporate Finance, and Takeovers," American Economic Review, American Economic Association, vol. 76(2), pages 323-329, May.
    8. Im, Kyung So & Pesaran, M. Hashem & Shin, Yongcheol, 2003. "Testing for unit roots in heterogeneous panels," Journal of Econometrics, Elsevier, vol. 115(1), pages 53-74, July.
    9. David Roodman, 2009. "A Note on the Theme of Too Many Instruments," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 71(1), pages 135-158, February.
    10. Myers, Stewart C. & Majluf, Nicholas S., 1984. "Corporate financing and investment decisions when firms have information that investors do not have," Journal of Financial Economics, Elsevier, vol. 13(2), pages 187-221, June.
    11. Xu, Jiaqi & She, Shengxiang & Gao, Pengpeng & Sun, Yunpeng, 2023. "Role of green finance in resource efficiency and green economic growth," Resources Policy, Elsevier, vol. 81(C).
    12. Meshesha Demie Jima & Patricia Lindelwa Makoni, 2023. "Financial Inclusion and Economic Growth in Sub-Saharan Africa—A Panel ARDL and Granger Non-Causality Approach," JRFM, MDPI, vol. 16(6), pages 1-16, June.
    13. Bronwyn Hall & Jacques Mairesse, 1998. "Does Cash Flow cause Investment and R and D: An Exploration Using Panel Data for French, Japanese, and United States Scientific Firms," Economics Series Working Papers 1998-W08, University of Oxford, Department of Economics.
    14. John Haltiwanger & Russell Cooper & Laura Power, 1999. "Machine Replacement and the Business Cycle: Lumps and Bumps," American Economic Review, American Economic Association, vol. 89(4), pages 921-946, September.
    15. Pradhan, Rudra P. & Arvin, Mak B. & Nair, Mahendhiran S. & Hall, John H. & Bennett, Sara E., 2021. "Sustainable economic development in India: The dynamics between financial inclusion, ICT development, and economic growth," Technological Forecasting and Social Change, Elsevier, vol. 169(C).
    16. Wafa Khémiri & Ahmed Chafai & Faizah Alsulami, 2023. "Financial Inclusion and Sustainable Growth in North African Firms: A Dynamic-Panel-Threshold Approach," Risks, MDPI, vol. 11(7), pages 1-19, July.
    17. Stewart C. Myers & Nicholas S. Majluf, 1984. "Corporate Financing and Investment Decisions When Firms Have InformationThat Investors Do Not Have," NBER Working Papers 1396, National Bureau of Economic Research, Inc.
    18. Shaukat, Badiea & Zhu, Qigui & Khan, M. Ijaz, 2019. "Real interest rate and economic growth: A statistical exploration for transitory economies," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 534(C).
    19. Berger, Philip G & Ofek, Eli & Yermack, David L, 1997. "Managerial Entrenchment and Capital Structure Decisions," Journal of Finance, American Finance Association, vol. 52(4), pages 1411-1438, September.
    20. Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August.
    21. Muhammad Akhtar & Kong Yusheng & Muhammad Haris & Qurat Ul Ain & Hafiz Mustansar Javaid, 2022. "Impact of financial leverage on sustainable growth, market performance, and profitability," Economic Change and Restructuring, Springer, vol. 55(2), pages 737-774, May.
    22. Demirguc-Kunt, Asli & Klapper, Leora, 2012. "Measuring financial inclusion : the Global Findex Database," Policy Research Working Paper Series 6025, The World Bank.
    23. Laura Power, 1998. "The Missing Link: Technology, Investment, And Productivity," The Review of Economics and Statistics, MIT Press, vol. 80(2), pages 300-313, May.
    24. Levin, Andrew & Lin, Chien-Fu & James Chu, Chia-Shang, 2002. "Unit root tests in panel data: asymptotic and finite-sample properties," Journal of Econometrics, Elsevier, vol. 108(1), pages 1-24, May.
    25. Robert E. Hall, 2005. "Employment Fluctuations with Equilibrium Wage Stickiness," American Economic Review, American Economic Association, vol. 95(1), pages 50-65, March.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Mário Santos & António Moreira & Elisabete Vieira, 2014. "Ownership concentration, contestability, family firms, and capital structure," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 18(4), pages 1063-1107, November.
    2. Khémiri, Wafa & Noubbigh, Hédi, 2020. "Size-threshold effect in debt-firm performance nexus in the sub-Saharan region: A Panel Smooth Transition Regression approach," The Quarterly Review of Economics and Finance, Elsevier, vol. 76(C), pages 335-344.
    3. Apostolos Dasilas & Nicolas Papasyriopoulos, 2015. "Corporate governance, credit ratings and the capital structure of Greek SME and large listed firms," Small Business Economics, Springer, vol. 45(1), pages 215-244, June.
    4. Mateev, Miroslav & Poutziouris, Panikkos & Ivanov, Konstantin, 2013. "On the determinants of SME capital structure in Central and Eastern Europe: A dynamic panel analysis," Research in International Business and Finance, Elsevier, vol. 27(1), pages 28-51.
    5. Martinsson, Gustav, 2009. "Finance and R&D Investments - is there a debt overhang effect on R&D investments?," Working Paper Series in Economics and Institutions of Innovation 174, Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies.
    6. Zeitun, Rami & Temimi, Akram & Mimouni, Karim, 2017. "Do financial crises alter the dynamics of corporate capital structure? Evidence from GCC countries," The Quarterly Review of Economics and Finance, Elsevier, vol. 63(C), pages 21-33.
    7. Hariem Abdullah & Turgut Tursoy, 2021. "Capital structure and firm performance: evidence of Germany under IFRS adoption," Review of Managerial Science, Springer, vol. 15(2), pages 379-398, February.
    8. Maria Elena Bontempi & Roberto Golinelli, 2012. "The effect of neglecting the slope parameters’ heterogeneity on dynamic models of corporate capital structure," Quantitative Finance, Taylor & Francis Journals, vol. 12(11), pages 1733-1751, November.
    9. Rana El Bahsh & Ali Alattar & Aziz N. Yusuf, 2018. "Firm, Industry and Country Level Determinants of Capital Structure: Evidence from Jordan," International Journal of Economics and Financial Issues, Econjournals, vol. 8(2), pages 175-190.
    10. Xiao, He, 2022. "Environmental regulation and firm capital structure dynamics," Economic Analysis and Policy, Elsevier, vol. 76(C), pages 770-787.
    11. Kanga, Désiré & Murinde, Victor & Soumaré, Issouf, 2020. "Capital, risk and profitability of WAEMU banks: Does bank ownership matter?," Journal of Banking & Finance, Elsevier, vol. 114(C).
    12. Li, Tongxia & Munir, Qaiser & Abd Karim, Mohd Rahimie, 2017. "Nonlinear relationship between CEO power and capital structure: Evidence from China's listed SMEs," International Review of Economics & Finance, Elsevier, vol. 47(C), pages 1-21.
    13. Mohamed, Hisham Hanifa & Masih, Mansur & Bacha, Obiyathulla I., 2015. "Why do issuers issue Sukuk or conventional bond? Evidence from Malaysian listed firms using partial adjustment models," Pacific-Basin Finance Journal, Elsevier, vol. 34(C), pages 233-252.
    14. Yu, Chih-Ping, 2015. "Financial policies on firm performance: The U.S. insurance industry before and after the global financial crisis," Economic Modelling, Elsevier, vol. 51(C), pages 391-402.
    15. Cuong Nguyen Thanh, 2019. "Optimal Cash Holding Ratio for Non-Financial Firms in Vietnam Stock Exchange Market," JRFM, MDPI, vol. 12(2), pages 1-13, June.
    16. Ruben Arrondo & Silvia Gomez-Anson, 2003. "A study of Spanish firms' security issue decision under asymmetric information and agency costs," Applied Financial Economics, Taylor & Francis Journals, vol. 13(10), pages 771-782.
    17. Zhang, Dongyang & Liu, Deqiang, 2017. "Determinants of the capital structure of Chinese non-listed enterprises: Is TFP efficient?," Economic Systems, Elsevier, vol. 41(2), pages 179-202.
    18. Faruk Bostanci & Eyup Kadioglu & Guven Sayilgan, 2018. "Determinants of Dividend Payout Decisions: A Dynamic Panel Data Analysis of Turkish Stock Market," IJFS, MDPI, vol. 6(4), pages 1-16, November.
    19. Hang, Markus & Geyer-Klingeberg, Jerome & Rathgeber, Andreas W. & Stöckl, Stefan, 2018. "Measurement matters—A meta-study of the determinants of corporate capital structure," The Quarterly Review of Economics and Finance, Elsevier, vol. 68(C), pages 211-225.
    20. Islam, Md Ariful & Hossain, Shahadat & Singh, Harjinder & Sultana, Nigar, 2021. "Outsider CEOs and corporate debt," International Review of Financial Analysis, Elsevier, vol. 74(C).

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:gam:jsusta:v:16:y:2024:i:6:p:2573-:d:1361046. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: MDPI Indexing Manager (email available below). General contact details of provider: https://www.mdpi.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.