TY - JOUR
T1 - Environmental Risk and Foreign Direct Investment
T2 - the role of Financial Sector Development
AU - Yiadom, Eric B.
AU - Mensah, Lord
AU - Bokpin, Godfred A.
N1 - Publisher Copyright:
© 2022 The Author(s)
PY - 2022/12
Y1 - 2022/12
N2 - The study examines the role of financial sector development in the relationship between Foreign direct investment (FDI) and environmental risk using a more comprehensive measurement of financial sector development. The study set up a panel dataset to cover 45 Sub-Saharan African economies from 1982 to 2018 and applies the system GMM technique to accommodate the dynamic nature of the dataset and make provisions for endogeneity and heteroskedasticity in the series. The findings suggest that the unmitigated effect of FDI on environmental risk is detrimental. However, FDI conditioned on the local financial sector development minimizes environmental risk. Again, the findings suggest that countries with low financial sector development indicators report worse environmental risk than their counterparts. The financial sector development is a composite index comprising financial depth, access, and efficiency. Hence, as a matter of policy, we suggest that countries should make a conscious effort to further develop these components by investing in financial infrastructures like technology, regulations, and institutions.
AB - The study examines the role of financial sector development in the relationship between Foreign direct investment (FDI) and environmental risk using a more comprehensive measurement of financial sector development. The study set up a panel dataset to cover 45 Sub-Saharan African economies from 1982 to 2018 and applies the system GMM technique to accommodate the dynamic nature of the dataset and make provisions for endogeneity and heteroskedasticity in the series. The findings suggest that the unmitigated effect of FDI on environmental risk is detrimental. However, FDI conditioned on the local financial sector development minimizes environmental risk. Again, the findings suggest that countries with low financial sector development indicators report worse environmental risk than their counterparts. The financial sector development is a composite index comprising financial depth, access, and efficiency. Hence, as a matter of policy, we suggest that countries should make a conscious effort to further develop these components by investing in financial infrastructures like technology, regulations, and institutions.
KW - Foreign Direct Investment
KW - General Method of Moment
KW - carbon dioxide emissions
KW - environmental risk
KW - financial development
UR - http://www.scopus.com/inward/record.url?scp=85137276967&partnerID=8YFLogxK
U2 - 10.1016/j.envc.2022.100611
DO - 10.1016/j.envc.2022.100611
M3 - Article
AN - SCOPUS:85137276967
SN - 2667-0100
VL - 9
JO - Environmental Challenges
JF - Environmental Challenges
M1 - 100611
ER -