Does financial inclusion affect corporate risk-taking?

Abstract

This study examines the effect of financial inclusion on corporate risk-taking, using a sample of 1443 publicly listed firms in the consumer cyclical sector across the Asian region from 2004 to 2022. We employ the panel fixed effect model, two-stage least squares, the system GMM, and dynamic panel threshold regression estimators. The results indicate that financial inclusion increases corporate risk-taking. We also confirm the presence of threshold effects related to firm size and Tobin's Q, indicating that the impact of financial inclusion on corporate risk-taking is non-monotonic. Specifically, financial inclusion has a stronger positive impact on risk-taking for smaller firms compared to larger ones, as well as for firms with higher Tobin's Q values. The results are robust to alternative measurements and estimation techniques.