The Impact of Financial Inclusion and Environmental Factors on Financial Performance: A Study of Manufacturing Firms

Abstract

This study investigates the relationship between financial inclusion, environmental factors, and financial performance within the context of manufacturing firms. It posits that financial inclusion and favorable environmental conditions significantly enhance institutional quality, which in turn positively influences financial performance. The research develops five key hypotheses: (1) financial inclusion positively affects institutional quality; (2) environmental factors positively influence institutional quality; (3) institutional quality has a direct positive effect on financial performance; (4) institutional quality mediates the relationship between financial inclusion and financial performance; and (5) it also mediates the relationship between environmental factors and financial performance. By employing a comprehensive framework, the study highlights the critical role of robust institutions in leveraging financial inclusion and environmental factors to drive economic success. The findings aim to guide policymakers and financial institutions in creating supportive frameworks that enhance both financial inclusion and institutional quality, ultimately fostering improved financial performance in the manufacturing sector.