The paper examines financial inclusion's impact on firms' growth in African countries. The paper employs the two-step system generalized method of moment (GMM) to mitigate endogeneity concerns and covers 2010 to 2019 periods to exclude the impact of the covid-19 crisis on the estimated parameters of the models. The findings show that automatic teller machines, acting as a proxy for financial inclusion, positively influence the growth of firms in ten African nations. Similarly, bank branches, which also serve as a proxy for financial inclusion, positively influence firms' growth in ten African nations. The results are robust to alternative model specifications. The results suggest that investors may benefit from firms’ business expansion as banks' financial inclusion strategy attracts additional deposits to lend to firms to fund profitable investments which stimulate their growth.
Abor, J. (2005), “The effect of capital structure on profitability: an empirical analysis of listed firm in Ghana”, Journal of Risk Finance, Vol.6, No. 5, pp. 438-447.
Allen, F., Demirguc-Kunt, A., Klapper, L. and Martinez Peria, M. S. (2016), “The foundations of financial inclusion: Understanding ownership and use of formal accounts”, Journal of Financial Intermediation, 27, 1–30. https://doi.org/10.1016/j.jfi.2015.12.003
Amihud, Y. (2002), "Illiquidity and stock returns: Cross-section and time-series effects", Journal of Financial Markets, 5(1), 31–56. https://doi.org/10.1016/S1386-4181(01)00024-6
Anarfo E. B., Abor, J. H., and Achampongosei, K. (2020), "Financial regulation and financial inclusion in Sub-Saharan Africa: Does financial stability play a moderating role?" Research in International Business and Finance, 51, 1-11. https://doi.org/10.1016/j. ribaf.2019.101070
Arellano, M., and Bond, S. (1991), "Some tests of specification for panel data: Monte Carlo evidence and an application to employment equations", Review of Economic Studies, 58(2), 277-297.
Auret, C. J., and Sinclaire, R. A. (2006), "Book-to-market ratio and returns on the JSE", Investment Analysts Journal, 35(63), 31–38. https://doi.org/10.1080/10293523.2006.11082476
Ayyagari, M., and Beck, T. (2015), "Financial inclusion in Asia?: An overview", Asian Devolopment Bank, 449, 1–27.
Banz. (1981). The relationship between return and market value of stock. Journal of Financial Economics, 9, 1–16.
Beck, T., Demirgüç-Kunt, A., & Maksimovic, V. (2005). Financial and legal constraints to growth: Does firm size matter? The Journal of Finance, 60(2), 137-177.
Belitski, M., Stettler, T., Wales, W., & Martin, J. (2023). Speed and scaling: An investigation of accelerated firm growth. Journal of Management Studies, 60(3), 639–687. https://doi.org/10.1111/joms.12869
Blundell, R., & Bond, S. (1998). Initial conditions and moment restrictions in dynamic panel data models. Journal of Econometrics, 87(1), 1–29. https://doi.org/10.1016/S0304-4076(98)00009-8
Chan, & Chen. (1991). Structural and return characteristics of small and large firms. The Journal of Finance, 46(4), 1467–1484. https://doi.org/10.1111/j.1540-6261.1991.tb04626.x
Chauvet, L., Jacolin, L. (2017). Financial inclusion, bank concentration, and firm performance. World Development, 97, 1-13.
Demirguc-Kunt, A., Klapper, L., Singer, D., Ansar, S., & Hess, J. (2018). The Global Findex Database 2017: Measuring Financial Inclusion and the Fintech Revolution. In The Global Findex Database 2017. https://doi.org/10.1596/978-1-4648-1259-
Fama, &, Boyer, L. T., & French. (2001). Required return on investments in construction. Journal of Finance, 115(1), 1–40. https://doi.org/10.1061/(asce)0733-9364(1989)115:1(109)
Fowowe, B. (2017). Access to finance and firm performance: Evidence from African countries. Review of Development Finance, 7(1), 6–17. https://doi.org/10.1016/j.rdf.2017.01.006
Frank, M. Z., & Goyal, V. K. (2009). Capital structure decisions: Which factors are reliably important? Financial Management, 38(1), 1–37. https://doi.org/10.1111/j.1755-053X.2009.01026.x
Fuertes-Callén, Y., & Cuellar-Fernández, B. (2019). Inter-relationship between firm growth and profitability in a context of economic crisis. Journal of Business Economics and Management, 20(1), 86–106. https://doi.org/10.3846/jbem.2019.6928
Gomes, J., and Schmid, L. (2010). Levered returns. Journal of Finance, 65(2), 467-494.
Horowitz, J. L., Loughran, T., & Savin, N. E. (2000). The disappearing size effect. Research in Economics, 54(1), 91–116. https://doi.org/10.1006/reec. 1999.0207
Ihenyen, C.J., Banigo, Macauly Gilbert, Mueni (2023). Firms growth and cashflow analysis: An empirical analysis of Nigeria firms. Central Asian Journal of Innovations on Tourism Management and Finance, 4(5), 32-41.
Kanne, S., Korn, O., & Uhrig-Homburg, M. (2023). Stock illiquidity and option returns. Journal of Financial Markets, 63 https://doi.org/10.1016/j.finmar. 2022.100765
King, R. G., & Levine, R. (1993). Finance , entrepreneurship,, Theory and evidence . 32, 513–542.
Maity, S., & Sahu, T. N. (2020). Role of public sector banks towards financial inclusion during pre and post introduction of PMJDY: a study on efficiency review. Rajagiri Management Journal, 14(2), 95–105. https://doi.org/10.1108/ramj-03-2020-0009
Matemilola, B. T., Bany-Ariffin A. N., Azman-Saini, W. N. W., and Nassir, A. (2019). Impact of institutional quality on the capital structure of firms in developing countries. Emerging Markets Review, 39, 175-209.
Matemilola B. T., Bany-Ariffin A. N., and Azman-Saini, W.N.W (2012). Financial leverage and shareholder’s required return: Evidence from South Africa corporate sector. Transition Studies Review, 18, 601-612.
Mihaela, H., Alexandru, E. R., At, I., Scholar, G., & Web, C. A. (2018). Measuring firm performance?: Testing A Proposed Model. 13(13), 103–114. https://doi.org/10.2478/sbe-2018-0023
Modigliani, F., & Miller, M. H. (1963). Corporate income taxes and the cost of capital?: The American Economic Review, 53(3), 433-443.
Modigliani, F. and Miller, M. H. (1958). The cost of capital, corporation finance and the theory of investment. The American Economic Review, 48(3), 261–297.
Myers, S. C., & Majluf, N. S. (1984). Corporate financing and investment decisions when firms have information that investors do not have. Journal of Financial Economics, 13(2), 187–221. https://doi.org/10.1016/0304-405X(84)90023-0
Neaime, S., & Gaysset, I. (2018). Financial inclusion and stability in MENA: Evidence from poverty and inequality. Finance Research Letters, 24, 199–220. https://doi.org/10.1016/j.frl.2017.09.007
Nizam, R., Karim, Z. A., Sarmidi, T., and Rahman, A. A. (2021). Financial inclusion and firm growth in Asean-5 countries: a new evidence using threshold regression. Finance Research Letters 41, https://doi.org/10.1016/j.frl.2020.101861 (forthcoming)
Obudah, B. C., & Tombofa, S. (2013). Effects of interest rate and debt on equity investment. American Journal of Humanities and Social Sciences, 1(2), 31–36. https://doi.org/10.11634/232907811301301
Ozili, P. K. (2021) ‘Financial inclusion research around the world: A review, Forum for Social Economics, 50(4), 457–479.
Pagano, P., & Schivard, P. (2003). Firm size distribution and growth. The Scandinavian Journal of Economics, 105(2), 255-274.
Stattman, D. (1980), Book values and stock returns: the Chicago MBA. A Journal of Selected Papers, 4, 25 – 45.
Rafiq, A., and Adewale, A. (2019). Factors influencing financial inclusion in India. International Journal of Business and Management, 3(6), 23–32. https://doi.org/10.26666/rmp.ijbm.2019.6.4
Ramli, N. A., Latan, H., & Solovida, G. T. (2019). Determinants of capital structure and firm financial performance—A PLS-SEM approach: Evidence from Malaysia and Indonesia. Quarterly Review of Economics and Finance, 71, 148–160. https://doi.org/10.1016/j.qref.2018.07.001
Schumpeter, J. (1911). The theory of economic development: An inquiry into profits, capital, credit, interest and the business cycle. Leipzig, Germany: Dunker & Humboldt., December 1993.
Solnik, B. (1983). The relation between stock prices and inflationary expectations: The international evidence. The Journal of Finance, 38(1), 35-48.
Solomon, E. M., & van Klyton, A. (2020). The impact of digital technology usage on economic growth in Africa. Utilities Policy, 67, 1–12. https://doi.org/10.1016/j.jup.2020.101104
Varaiya, N., Kerin, R. A., & Weeks, D. (1987). The relationship between growth, profitability, and firm value. Strategic Management Journal, 8(5), 487–497. https://doi.org/10.1002/smj.4250080507
Hayatu, A., Matemilola, B. T., A.N, B.-A., & Ni, S. W. (2024). Impact of Financial Inclusion on Firms’ Growth in African Nations. International Journal of Academic Research in Business and Social Sciences, 14(12), 3851–3866.
Copyright: © 2024 The Author(s)
Published by Knowledge Words Publications (www.kwpublications.com)
This article is published under the Creative Commons Attribution (CC BY 4.0) license. Anyone may reproduce, distribute, translate and create derivative works of this article (for both commercial and non-commercial purposes), subject to full attribution to the original publication and authors. The full terms of this license may be seen at: http://creativecommons.org/licences/by/4.0/legalcode
