Enterprise creation for sustainable environment: the criticality of financial development in African economies

James Temitope Dada, Folorunsho M. Ajide, Mosab I. Tabash, Samrat Ray and Mamdouh Abdulaziz Saleh Al-Faryan

Journal of Financial Regulation and Compliance, 2025, vol. 33, issue 5, 808-828

Abstract: PurposeThe stylized evidence suggests that economic growth is one of the significant factors contributing to ecosystem degradation. The purpose of this study is to investigate the influence of enterprise creation on the environment and the moderating impact of financial development in the linkages between enterprise creation and the environment.Design/methodology/approachA panel of 31 African nations between 1991 and 2020 are used for the study. Furthermore, cross-sectional autoregressive distributed lag, augmented mean group, common correlated effect mean group, Dumitrescu and Hurlin panel causality tests are used to examine the long-run relationship and direction of causation among the variables.FindingsThis found that enterprise creation, per capita income and trade openness worsen environmental quality in the long run. Conversely, financial development strengthens ecological assets. Regarding the moderating role of financial development in the linkages, the result suggests that financial development lessens the negative impact of enterprise creation on the environment. The panel causality results indicate that a unidirectional causality exists from enterprise creation and trade openness to ecological footprint. However, a bidirectional causal relation exists between financial development, per capita income, urbanization and ecological assets.Practical implicationsThis study’s outcome hints that most entrepreneurs in the region are “opportunity entrepreneurs” and not “green entrepreneurs” just looking for a means of survival. Hence, regional policymakers should formulate policies to transform entrepreneurs into green entrepreneurs.Originality/valueThe study deviates from the literature trend to investigate the role of enterprise creation and financial development in sustainable environments in African economies.

Keywords: Enterprise creation; Sustainable environment; Financial development; Africa (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eme:jfrcpp:jfrc-11-2024-0238

DOI: 10.1108/JFRC-11-2024-0238

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