Financial Link Research Articles

Rethinking energy poverty alleviation through financial inclusion: Do institutional quality and climate change risk matter?

The main aim of this paper is to determine the impact of financial inclusion on energy poverty alleviation. It also interrogates whether institutional quality and climate change risk significantly influence the financial inclusion-energy poverty alleviation link using balanced panel data from 34 Sub-Saharan African countries from 2004 to 2021. Evidence from Discroll-Kraay Fixed Effects and Two-Step Instrumental Variable Generalized Method of Moments (2SIV-GMM) depicts heterogeneous energy poverty-alleviating impact of financial inclusion, demonstrating that financial inclusion is more instrumental in lower-income than lower-middle-income countries. Also, the results indicate a significant positive moderating role of institutional quality and a detrimental effect of climate change risk on financial inclusion-energy poverty alleviation nexus. Nevertheless, Dynamic Panel Threshold Regression results reveal threshold effects of financial inclusion, institutional quality, and climate change risk on energy poverty alleviation. The paper professes that financial regulations in allocating green resources would aid in alleviating energy poverty in Sub-Saharan Africa.

Investigating environmental prioritization: role of financial resources and female entrepreneurship in the Mediterranean region

PurposeIn this study, we aim to define a new ecological financial pecking order. We examine how SMEs' adherence to the environment in the Mediterranean region is impacted by their financial resources and how women Entrepreneurship could play a moderating role in this relationship.Design/methodology/approachOur data are pooled cross-sectional firm level data across 14 Mediterranean countries, with a total of 5,949 observations over the period from 2018 to 2020. We look into the moderating influence of SMEs’ female ownership on the financial sources-environmental engagement link using GLS estimations. To reach our aim we focus on seven funding sources and develop a green engagement construct using JCA. Besides, we distinguish between the least and most environmentally engaged companies in the EU and its neighborhood and compare the different interactions and possible moderations.FindingsResults show that government subsidies foster environmental engagement, followed by supplier credits with a less significant positive impact. The bank credits have the least significant beneficial influence, while non-bank financial institutions have a non-significant effect. We underline that environmental engagements are hindered by the other funds, issued bonds and internal funds.Research limitations/implicationsSMEs in the Mediterranean region, particularly the less environmentally conscious, require strong legal frameworks to enforce environmental responsibility and raise awareness. Integrating less environmentally committed EU SMEs into state subsidy strategies is a chance to improve environmental responsibility in the region.Originality/valueTo our knowledge, there are no prior studies that present a detailed financial structure and environmental management investigation for SMEs within the Mediterranean region while considering the moderating effect of women's entrepreneurship.

The Moderating Role of Country Governance in the Link between ESG and Financial Performance: A Study of Listed Companies in 58 Countries

Corporate environmental, social, and governance (ESG) performance is expected to positively affect financial performance because it helps firms gain sociopolitical legitimacy from receiving positive stakeholder awareness and gaining key resources. However, the research on the relationship between corporate ESG performance and financial performance has yielded mixed results. This paper explores the impact of the country governance environment on the ESG–financial performance link. We propose that the positive ESG–financial performance relationship is stronger for firms in countries with better governance. Empirical analyses using a large panel dataset covering 11 years and 58 countries support our arguments. We found that countries with more effective governance in political stability, regulatory quality, and control of corruption strengthen the positive ESG–financial performance relationship. The implications of our findings are significant for firms that face different governance environments and develop sustainable business strategies.

Financial development and environmental quality in developed countries: a systematic literature review

Studying the effect of financial development on environmental quality has become imperative in the modern world due to the climate change challenges. Hence, this systematic literature review provides a comprehensive overview of the existing body of knowledge on the nexus of financial development and environmental quality in developed countries. Three databases: Web of Science, Scopus, and Google Scholar were used to search the relevant articles in this domain. Finally, 20 journal articles qualified for the systematic literature review based on the pre-defined article inclusion criteria as per the Preferred Reporting Items for Systematic Reviews and Meta-analyses (PRISMA) framework. We found that a range of econometric approaches were used in all examined papers, employing a diverse range of proxy variables to model the relationship between financial development and environmental quality. Overall, the findings of the examined papers imply mixed evidence of this nexus in developed countries. We highlight the knowledge gap in this research domain examining the financial development and environmental quality link from different proxies.

Does Innovation Play a Role in the Relationship Between Corporate Social and Financial Performance? A Systematic Literature Review

Abstract: Purpose: This research aims to provide a comprehensive knowledge map of the intellectual structure of the field of study on the role of innovation in shaping the social and financial performance link. Research methodology: Systematic literature review using the SALSA (Search, Appraisal, Synthesis, and Analysis) Method based on a 10-year data set (2012-2021) from the “Google Scholar” database. Results: The findings point to the existence of a positive influence of innovation in linking Corporate Social Performance to firm Financial Performance and reveal the existence of five themes in the research, specifically complementarity between Corporate Social Responsibility and innovation, the special case of small and medium-sized enterprises, and the context of emerging countries. Also, we highlight a lack of research in this field and the theoretical, design, and methodological limitations of previous studies. Limitations: The primary limitation of this study is the small number of studies that address the research question addressed by this systematic literature review, which was generated by the research protocol. Contribution: The study suggests avenues for future research to address the previous shortcomings. Particularly, identifying the condition effects through which innovation may affect the studied relationship. Keywords: 1. Corporate financial performance (CFP) 2. Corporate Social Responsibility (CSR) 3. Innovation 4. Mediation 5. Moderation

Türkiye’deki Küreselleşme-Ekonomik Kompleksite-Finansal Kalkınma İlişkisinin İncelenmesi

Purpose: The purpose of this research is to examine the globalization-financial development-economic complexity link in Turkey for the period 1970-2017. Design/Methodology: In the first stage of the analysis, a tri-variate model is proposed. In the second stage, cointegration and Granger causality tests that have single Fourier-frequency functions in their testing equations are employed to examine causal links among the employed variables. Findings: The main findings indicate that (i) globalization and political globalization both indirectly (through financial development) and directly cause economic complexity; (ii) economic globalization indirectly causes economic complexity through financial development; (iii) social globalization and financial development directly cause economic complexity; (iv) bi-directional causality exists between globalization and financial development. These findings reveal that globalization is crucial for economic complexity. Also, ignoring the intermediating and direct roles of financial development in promoting Turkey’s economic complexity can be problematic. Limitations: This study focuses only on Turkey. Further research can focus on other emerging markets to confirm if similar causalities exist. Originality/Value: By using cointegration and causality tests that have Fourier-components, this study accounts for the possible effects of structural changes. Additionally, this study considers sub-indices of globalization and their causal links with financial development and economic complexity. Lastly, although financial development-economic complexity link and globalization-economic complexity nexus were separately investigated in some studies, these studies used bi-variate models. This study proposes a tri-variate model to examine cointegration and causalities among these variables.

Assessing the rate of identification of financial hardship action items and completion of referrals for care (492)

Objectives: Financial navigation services describe processes to screen patients for financial hardship (FH) and link patients to financial assistance and resources at the health system level. However, rates of referral and the best workflow to utilize these tools are unknown. We aimed to evaluate the use of FH screening instruments to guide referrals to financial navigation services (i.e., social worker, financial counselor, psycho-oncology counseling) within a health system. Methods: We conducted a pilot study implementing universal FH screening in academic gynecologic oncology practice. A lay navigator conducted FH screening at the start of treatment using the 11-item COmprehensive Score for financial Toxicity (COST <26), moderate/ severe distress on the National Comprehensive Cancer Network Distress Thermometer (score >4), and a 10-item financial needs (FN) checklist asking whether they had difficulty affording certain items (i.e., medications, paying bills, lodging). We abstracted referral placement and follow-up information addressing financial needs from the medical record. Results: We screened 131 patients. The average age was 60.4 years (range: 19-84), and 30.6% were non-White. Cancer types included ovarian (40.0%), uterine (36.6%), cervical (17.6%), and vulvar/vaginal/ other (7.6%). Most patients had a primary disease (55.7%) and were on first-line (55.0%) systemic therapy. Of 12 (9.2%) patients with both FH and moderate/severe distress, three (25%) patients received a referral. Of 13 (9.9%) patients with FH but no/mild distress, three (23.1%) patients received a referral. Of 27 (20.6%) patients with moderate/ severe distress but no FH, five (18.5%) patients received a referral. Of the 70 patients who screened negative for FH or moderate/severe distress, nine patients (12.9%) had referrals; of them, four responded ‘yes’ on the distress thermometer regarding practical concerns, such as financial/cost issues. Of 36 (27.5%) patients who reported > 1 concern on the FN checklist, 11 (30.6%) received a referral, and a majority (n=31, 86%) had either positive FH or distress screens. Conclusions: Despite the implementation of FH and distress screening, only about one in four patients who screened positive for FH, moderate/severe distress, or both, received referrals within the health system to address these positive screens. Some patients who screened negative for FH or moderate/severe distress still received referrals, suggesting that interaction with lay navigators may improve patient access to financial and supportive care resources beyond what an automated process can detect. The financial needs checklist generated the highest percentage of referrals (27.5%) compared to COST and/or distress thermometer screening. Objectives: Financial navigation services describe processes to screen patients for financial hardship (FH) and link patients to financial assistance and resources at the health system level. However, rates of referral and the best workflow to utilize these tools are unknown. We aimed to evaluate the use of FH screening instruments to guide referrals to financial navigation services (i.e., social worker, financial counselor, psycho-oncology counseling) within a health system. Methods: We conducted a pilot study implementing universal FH screening in academic gynecologic oncology practice. A lay navigator conducted FH screening at the start of treatment using the 11-item COmprehensive Score for financial Toxicity (COST <26), moderate/ severe distress on the National Comprehensive Cancer Network Distress Thermometer (score >4), and a 10-item financial needs (FN) checklist asking whether they had difficulty affording certain items (i.e., medications, paying bills, lodging). We abstracted referral placement and follow-up information addressing financial needs from the medical record. Results: We screened 131 patients. The average age was 60.4 years (range: 19-84), and 30.6% were non-White. Cancer types included ovarian (40.0%), uterine (36.6%), cervical (17.6%), and vulvar/vaginal/ other (7.6%). Most patients had a primary disease (55.7%) and were on first-line (55.0%) systemic therapy. Of 12 (9.2%) patients with both FH and moderate/severe distress, three (25%) patients received a referral. Of 13 (9.9%) patients with FH but no/mild distress, three (23.1%) patients received a referral. Of 27 (20.6%) patients with moderate/ severe distress but no FH, five (18.5%) patients received a referral. Of the 70 patients who screened negative for FH or moderate/severe distress, nine patients (12.9%) had referrals; of them, four responded ‘yes’ on the distress thermometer regarding practical concerns, such as financial/cost issues. Of 36 (27.5%) patients who reported > 1 concern on the FN checklist, 11 (30.6%) received a referral, and a majority (n=31, 86%) had either positive FH or distress screens. Conclusions: Despite the implementation of FH and distress screening, only about one in four patients who screened positive for FH, moderate/severe distress, or both, received referrals within the health system to address these positive screens. Some patients who screened negative for FH or moderate/severe distress still received referrals, suggesting that interaction with lay navigators may improve patient access to financial and supportive care resources beyond what an automated process can detect. The financial needs checklist generated the highest percentage of referrals (27.5%) compared to COST and/or distress thermometer screening.

Analysis of the dynamics of environmental degradation for 18 upper middle-income countries: the role of financial development

This study aims at investigating the dynamics of environmental degradation by focusing on the financial development-CO2 emissions link. In this purpose, economic growth, renewable energy consumption, trade openness and urbanization are integrated into the CO2 emissions model as other explanatory variables. In this study, 18 upper-middle-income countries with the highest growth rate in the world are examined for the period 1990-2018 by AMG method, which considers the cross-sectional dependence and slope heterogeneity. In addition, the causal linkages between variables are explored by Dumitrescu-Hurlin panel bootstrap causality technique. As a result of the study, it is found that financial development and renewable energy consumption reduce CO2 emissions. In addition, it is determined that economic growth, urbanization, and trade openness deteriorate the environmental quality. As a result of causality analysis, while one-way is found from renewable energy consumption to CO2 emissions, a bidirectional causality is observed between financial development and CO2 emissions. Empirical findings provide several policy suggestions that decrease CO2 emissions in these countries.

Understanding the effects of Environment, Social, and Governance conduct on financial performance: Arguments for a process and integrated modelling approach

To date, an overwhelming number of research findings on Environment, Social, and Governance (ESG) conduct and financial performance remains inconclusive. Furthermore, research has not identified nor explained the “underlying mechanisms” behind this relationship. To encourage future research, we discuss the mechanisms by identifying the first-order, mediating, and moderating variables. We synthesize recent studies for emerging themes and implications; argue for a process and integrated approach for modelling causality between ESG conduct and financial performance variables; and suggest methods to analyze the models. We also advocate for researchers to explore the idea that balancing corporate conduct among the E, S, and G components may provide revelations about financial performance. We also discuss how incorporating “greenwashing” in a process and integrated model may explain the ESG conduct and financial performance link, or more than likely the lack of it.

Does supplier involvement enhance financial performance? The encapsulation effects of product modularity and smartness

PurposeThis study aims to explore the conditional relationships between supplier involvement and financial performance. From a problem-solving perspective, this study takes the focal firm as a problem-solving system. It is postulated that supplier involvement enhances financial performance by helping solve complex problems of new product development. Furthermore, product modularity and smartness are considered contingent factors to clarify the boundary conditions.Design/methodology/approachThe ordinary least squares regression was conducted to test the hypotheses based on survey data from 136 high-tech firms in China.FindingsSupplier involvement is positively related to financial performance. Product modularity weakens the impact of supplier involvement on financial performance. Furthermore, product smartness strengthens the negative influence of product modularity on the relationship between supplier involvement and financial performance.Originality/valueThis study combines supplier involvement with product attributes. It takes a problem-solving perspective to rethink suppliers’ roles in new product development as problem-solvers rather than resource holders. Furthermore, this study advances the encapsulation effects of product modularity and smartness to influence the supplier involvement–financial performance link.

Links among energy intensity, non-linear financial development, and environmental sustainability: New evidence from Asia Pacific Economic Cooperation countries

Environmental sustainability has gained much attention in the recent decade. This study examines the links among energy intensity, non-linear financial development, and environmental sustainability in the presence of economic growth of the Asia Pacific Economic Cooperation (APEC) countries from a period of 1990–2016. We apply advanced econometric methodologies for empirical analysis. Empirical results support the presence of inverted U-shaped Environment Kuznets Curve (EKC). Our linear function findings indicate that energy intensity, financial development, and economic growth are positively associated with the ecological footprint. However, these variables are negatively related to APEC countries’ ecological footprint in the non-linear phase. These results support the EKC hypothesis for APEC countries. We found a positive relationship between energy intensity and ecological footprint, indicating that energy intensity is associated with deteriorating environmental sustainability. We confirm a financial development-driven U-shaped link with an ecological footprint at a maximum turning point of −7.9653. There are U-shaped and N-shaped EKC relationships between economic growth and ecological footprint at a maximum and minimum turning point of −8.07029 and 23.5465, respectively. Overall, at the initial stage, financial development and economic growth deteriorate the environment to a point after which it improves. Policymakers are encouraged to advocate technological advancements, address market failure, get the price right by pricing the pollution like carbon pricing, reforming inefficient subsidies, and decouple the links between environmental vicious and economic goods. Study limitations and directions for future research in the area have been discussed as well.

Analysis of submissions to the EU’s public consultation on tobacco traceability and security features

BackgroundThe Protocol to Eliminate Illicit Trade in Tobacco Products requires all parties to establish a tobacco track and trace (T&T) system. In 2016, the European Commission held a public consultation...

Does structural capital count in human capital-corporate financial performance relationship? Evidence from deposit money banks in Nigeria

PurposeThe purpose of this paper is to explore human capital and corporate financial performance link from the perspective of human capital theory, resources-based view and balanced score card approach, and the mediating role of structural capital in this relationship.Design/methodology/approachOverall, a data set was drawn from five-year annual reports of deposit money banks (DMBs) in Nigeria. Additionally, the bootstrap procedure was performed to test the mediating role of structural capital.FindingsSpecifically, the paper results indicate that whereas human capital has significant positive effect on corporate financial performance and structural capital, structural capital has significant positive effect on corporate financial performance. Additionally, the study finds structural capital to mediate the effect of human capital on organizational financial performance.Research limitations/implicationsThis paper focused on 12 DMBs in Nigeria and their five year annual reports. Accordingly, future studies in this area should increase the number of banks and years, and include firms operating in insurance, manufacturing, telecommunication and oil and gas industries to permit comparability of results and broader basis for generalizability. Moreover, the study results provide insights that would serve as robust empirical basis for policy makers to insist on enhancement of the value of human and structural capital variables.Practical implicationsThe managers of DMBs should commit to development of their employees through improvement in their training and health programs, among others. Also, they should ensure continuous improvement of their structural capital to enable the investments in their employee to translate to enhanced corporate financial performance.Originality/valueTo the best of the author’s knowledge, this is the first study to explore the mediation effect of structural capital on the human capital-corporate financial performance link using evidence from DMBs in Nigeria and, thus, extends and deepens extant literature on human capital-organizational performance nexus.

Governmental goals and the international strategies of state-owned multinational enterprises: a conceptual discussion

State owned multinational enterprises (SOMNEs) have received extensive attention in recent research in international business and corporate governance, which demonstrates effects of state ownership on a range of international strategic decisions such as the degree of internationalization, foreign entry modes, and host country location choices. Such effects are explained by factors such as SOMNEs’ non-financial goals, corporate governance, and institutional pressures. However, results are mixed and context-dependent, and overall we still have an incomplete understanding of what governments aim to achieve through SOMNEs, and how these goals in turn lead to different international strategies. This conceptual article aims to explore how specific government goals may affect international strategies. We provide a more fine-grained view on SOMNE financial and non-financial goals and link them to key international strategic decisions such as the degree of internationalization, entry and establishment modes, and host country location choice. We review and extend previous literature and identify novel theoretical arguments, leading to an extensive set of propositions. We also sketch ideas for empirical studies of SOMNE objectives.

Do formal and informal institutions shape the influence of sustainable banking on financial development?

This paper explores the moderating role of formal and informal institutions on the sustainable banking and financial development link. We compute an aggregated measure of sustainability in the banking sector for a sample of 46 countries for the period 2010-2018. Our results indicate that sustainable banking positively influences financial development only in countries with strong formal institutions. Nevertheless, informal institutions can generate the necessary trust in the banking sector, allowing the positive effect of sustainable banking on financial development in countries with weak formal institutions. The results are robust after controlling the potential endogeneity issues.

Financial literacy programmes targeting the poor: the possibilities of using financial literacy as a tool for financial inclusion

The main aim of this study is to examine the nature of the term financial literacy and link it to opportunities for financial inclusion. The author uses experience of some Hungarian programmes. Financial literacy is the focus of some of them, while in other cases it is just a part of a more complex initiative. After the literature review, the study offers answers for the following research questions: • What are the main characteristics of existing financial literacy programmes in Hungary? • How financial exclusion and the lack of financial literacy are connected in practice? • What are the strengths (achievements) and weaknesses (pitfalls and disadvantages) of existing financial literacy programmes related to the financial inclusion of poor and marginalized social groups? Data from semi-structured in-depth expert interviews, documents and former research papers were collected for identifying Hungarian financial literacy programmes and their existing, missing and potential connections to financial inclusion. Originality of the Research In the literature, there are few articles that connect financial literacy and financial inclusion. Similarly, in practice, financial literacy programmes rarely target the poor. In turn, financial awareness is a very strong prerequisite of financial inclusion, e.g. successful debt settlement for financially vulnerable groups. The findings from the study will enlighten policy-makers, managers of financial institutions and financial inclusion advocates on the importance of special context and complexity of financial literacy programmes provided for the poor.

Financial inclusion and economic growth: The role of governance in selected MENA countries

Although the relationship between financial development and economic growth have been extensively studied, the literature that examines the role of financial inclusion, as a key factor of financial development, and the possible impact of governance quality on financial inclusion link to growth is not as vast. Promoting financial inclusion and developing good governance are main, but challenging priorities in the MENA region. The paper empirically investigates the relationship between financial inclusion, governance, and economic growth in the MENA region. A system General Method of Moments (GMM) dynamic panel model technique is employed on annual data for 44 emerging markets (EMs) and MENA over the period 1990–2018, using a number of measures of financial inclusion covering the households and the firms’ access to finance. Particularly, the study uses indicators such as the number of bank accounts (per 1000 adult population), bank accounts for corporates/enterprises, and the number of bank branches and ATMS (per 100,000 people), percentage of firms using banks to finance investments, and the percentage of firms using bank loans to finance working capital. The results of the study indicate that financial inclusion positively impacts GDP per capita growth in the selected countries. Financial inclusion measured by the households’ financial access index has a positive and statistically significant impact on economic growth in the MENA region, but requires supervisory and regulatory regimes with backing of the rule of law, judicial independence, contract enforcement, control of corruption, and political stability. The results also indicate that the effect firms’ access to finance is only statistically significant in the presence of strong institutions. Finally, our results imply that countries with relatively low levels of financial access services, such as the MENA region, would benefit the most from an improvement in governance. Hence, our policy implications are directed towards developing a national strategic plan aimed towards improving access to finance coupled with policies aimed at improving the level of governance in order to maximize the impact of financial access on economic growth.

Institutional quality and the financial inclusion-poverty alleviation link: Empirical evidence across countries

Institutional quality in the form of extractive or inclusive institutions influences economic outcomes. We examine the positive moderating effect of institutional quality on the relationship between financial inclusion and poverty alleviation over a sample of seventy-five developing and developed countries (2004–2017). We use six different financial inclusion measures together with an informal political institution variable, applying both cross-section and quantile analysis. We find that institutional quality intensifies the beneficial effects of financial inclusion on poverty rates. This effect is more pronounced in poorer economies than in wealthier ones. Our findings yield implications for policy makers seeking to tackle the institutional causes of poverty.

Unconventional monetary policy in a nonlinear quadratic model

Abstract After the financial market meltdown and the Great Recession of the years 2007–9, the financial market-macro link has become an important issue in monetary policy modeling. We develop a dynamic model that contains a nonlinear Phillips curve, a dynamic output equation, and a nonlinear credit flow equation – capturing the importance of credit cycles, risk premia, and credit spreads. Our Nonlinear Quadratic Model (NLQ) model has three dynamic state equations and a quadratic objective function. It can be used to evaluate the response of central banks to the Great Recession in moving from conventional to unconventional monetary policy. We solve the model with a new numerical procedure using estimated parameters for the euro area. We conduct simulations to explore the (de)stabilizing effects of the nonlinearities in the model. We demonstrate that credit flows, risk premia, and credit spreads play an important role as an amplification mechanism and in affecting the transmission of monetary policy. We thereby highlight the importance of the natural rate of interest as an anchor for a central bank target and the weight it places on the credit flows for the effectiveness of unconventional monetary policy. Our model is similar in structure compared to larger scale macro-econometric models which many central banks employ.

Analysis of submissions to the EU’s public consultation on tobacco traceability and security features

Abstract Background The Illicit Trade Protocol (ITP) requires all Parties to establish a tobacco track and trace (T&amp;T) system. In 2016, the European Commission held a public consultation on T&amp;T implementation in which interested parties were asked to respond online to 22 multiple-choice questions and were given additional opportunities to leave comments if desired. In May 2019, the EU's T&amp;T system became operational. This paper explores tobacco industry influence over and policy positions within the consultation process. Methods The Illicit Trade Protocol (ITP) requires all Parties to establish a tobacco track and trace (T&amp;T) system. In 2016, the European Commission held a public consultation on T&amp;T implementation in which interested parties were asked to respond online to 22 multiple-choice questions and were given additional opportunities to leave comments if desired. In May 2019, the EU's T&amp;T system became operational. This paper explores tobacco industry influence over and policy positions within the consultation process. Results Of the 197 consultation responses analysed, 131 (66.4%) had financial links to the tobacco industry. 89 respondents were trade associations, 74 of which were financially linked (33 had TTC members). 29 (22.1%) of the financially-linked respondents were not transparent about their links. There was a clear divide in the policy preferences of respondents with and without a financial link. Collectively, respondents with a financial link supported an industry-operated solution. Conclusions There was an extensive lobbying effort by the tobacco industry over the EU's T&amp;T system, with TTCs' interests being represented repeatedly through multiple trade associations. The transparency requirements regarding consultation respondents' affiliations with relevant stakeholders (such as tobacco manufacturers) should be improved for future tobacco-related consultations. Key messages There was an extensive lobbying effort on the part of the tobacco industry Several respondents with financial links to the tobacco industry did not disclose these. Collectively, respondents with a financial link to the tobacco industry supported an industry-operated solution which would not have met the requirements of the ITP.