ISSN: 2225-8329
Open access
Purpose: This study examines a conditional framework linking international financial integration with perceived sustainable economic growth prospects through financial development and tests institutional quality as a moderator of the direct integration–growth association. It distinguishes access to international finance from domestic intermediation capacity and the governance conditions under which financial integration is associated with sustainable development prospects. Method: A cross-sectional quantitative survey of 480 respondents was analyzed using SmartPLS 4 and partial least squares structural equation modeling (PLS-SEM). The instrument comprised 20 seven-point items measuring international financial integration, financial development, institutional quality, and sustainable economic growth prospects. The measurement and structural models were evaluated, and direct, indirect, and interaction paths were assessed using 5,000 bootstrap replications. Cross-validation, robustness, and sensitivity analyses served as additional diagnostics. Findings: In the sample, international financial integration was positively associated with financial development (? = .494), which was positively associated with sustainable growth prospects (? = .343). The indirect association was .170, with a 95% bootstrap confidence interval of [.122, .219]. The direct association at average institutional quality was not statistically supported (? = .040, p = .396), whereas the integration–institutional-quality interaction was positive (? = .209, p < .001). Explained variance was .266 for financial development and .278 for sustainable growth prospects. These findings support a conditional integration–intermediation–governance pattern within the study sample, while the cross-sectional design does not establish causal effects. Originality/Implications: The study evaluates an explicitly bounded integration–intermediation–governance framework with transparent measurement and conditional-effect reporting. The findings suggest that financial openness, domestic financial capability, and institutional safeguards should be considered jointly rather than treating cross-border financial volume as equivalent to sustainable development.
Acemoglu, D., Naidu, S., Restrepo, P., & Robinson, J. A. (2019). Democracy does cause growth. Journal of Political Economy, 127(1), 47–100. https://doi.org/10.1086/700936
Ahamed, M. M., & Mallick, S. K. (2019). Is financial inclusion good for bank stability? International evidence. Journal of Economic Behavior & Organization, 157, 403–427. https://doi.org/10.1016/j.jebo.2017.07.027
Ahmed, F., Kousar, S., Pervaiz, A., & Shabbir, A. (2022). Do institutional quality and financial development affect sustainable economic growth? Evidence from South Asian countries. Borsa Istanbul Review, 22(1), 189–196. https://doi.org/10.1016/j.bir.2021.03.005
Battiston, S., Mandel, A., Monasterolo, I., Schütze, F., & Visentin, G. (2017). A climate stress-test of the financial system. Nature Climate Change, 7(4), 283–288. https://doi.org/10.1038/nclimate3255
Benitez, J., Henseler, J., Castillo, A., & Schuberth, F. (2020). How to perform and report an impactful analysis using partial least squares: Guidelines for confirmatory and explanatory IS research. Information & Management, 57(2), Article 103168. https://doi.org/10.1016/j.im.2019.05.003
Berg, F., Kölbel, J. F., & Rigobon, R. (2022). Aggregate confusion: The divergence of ESG ratings. Review of Finance, 26(6), 1315–1344. https://doi.org/10.1093/rof/rfac033
Binder, M., Cheung, Y. L., Georgiadis, G., & Sharma, S. (2024). Institutions, international financial integration, and output growth. Journal of Economic Behavior & Organization, 219, 450–472. https://doi.org/10.1016/j.jebo.2024.01.015
Boateng, G. O., Neilands, T. B., Frongillo, E. A., Melgar-Quiñonez, H. R., & Young, S. L. (2018). Best practices for developing and validating scales for health, social, and behavioral research: A primer. Frontiers in Public Health, 6, Article 149. https://doi.org/10.3389/fpubh.2018.00149
Bolton, P., & Kacperczyk, M. (2021). Do investors care about carbon risk? Journal of Financial Economics, 142(2), 517–549. https://doi.org/10.1016/j.jfineco.2021.05.008
Caldara, D., & Iacoviello, M. (2022). Measuring geopolitical risk. American Economic Review, 112(4), 1194–1225. https://doi.org/10.1257/aer.20191823
Campiglio, E., Dafermos, Y., Monnin, P., Ryan-Collins, J., Schotten, G., & Tanaka, M. (2018). Climate change challenges for central banks and financial regulators. Nature Climate Change, 8(6), 462–468. https://doi.org/10.1038/s41558-018-0175-0
Caporale, G. M., Sova, A. D., & Sova, R. (2025). International financial integration, economic growth and threshold effects: Some panel evidence for Europe. Journal of International Money and Finance, 158, Article 103407. https://doi.org/10.1016/j.jimonfin.2025.103407
Cerutti, E., Claessens, S., & Rose, A. K. (2019). How important is the global financial cycle? Evidence from capital flows. IMF Economic Review, 67(1), 24–60. https://doi.org/10.1057/s41308-019-00073-5
Cinelli, C., & Hazlett, C. (2020). Making sense of sensitivity: Extending omitted variable bias. Journal of the Royal Statistical Society: Series B (Statistical Methodology), 82(1), 39–67. https://doi.org/10.1111/rssb.12348
Colgan, J. D., Green, J. F., & Hale, T. N. (2021). Asset revaluation and the existential politics of climate change. International Organization, 75(2), 586–610. https://doi.org/10.1017/S0020818320000296
Coppola, A., Maggiori, M., Neiman, B., & Schreger, J. (2021). Redrawing the map of global capital flows: The role of cross-border financing and tax havens. The Quarterly Journal of Economics, 136(3), 1499–1556. https://doi.org/10.1093/qje/qjab014
Dasgupta, P. (2021). The economics of biodiversity: The Dasgupta review. HM Treasury. https://www.gov.uk/government/publications/final-report-the-economics-of-biodiversity-the-dasgupta-review
De Haas, R., & Popov, A. (2023a). Finance and green growth. The Economic Journal, 133(650), 637–668. https://doi.org/10.1093/ej/ueac081
De Haas, R., & Popov, A. (2023b). A reply to Listo, Saberian and Thivierge (2023) (I4R Discussion Paper Series No. 96). Institute for Replication. https://www.rwi-essen.de/fileadmin/user_upload/RWI/Publikationen/I4R_Discussion_Paper_Series/096_I4R_DeHaas_Popov.pdf
Demirgüç-Kunt, A., Klapper, L., Singer, D., & Ansar, S. (2022). The Global Findex Database 2021: Financial inclusion, digital payments, and resilience in the age of COVID-19. World Bank. https://doi.org/10.1596/978-1-4648-1897-4
Flake, J. K., & Fried, E. I. (2020). Measurement schmeasurement: Questionable measurement practices and how to avoid them. Advances in Methods and Practices in Psychological Science, 3(4), 456–465. https://doi.org/10.1177/2515245920952393
Flammer, C. (2021). Corporate green bonds. Journal of Financial Economics, 142(2), 499–516. https://doi.org/10.1016/j.jfineco.2021.01.010
Flora, D. B. (2020). Your coefficient alpha is probably wrong, but which coefficient omega is right? A tutorial on using R to obtain better reliability estimates. Advances in Methods and Practices in Psychological Science, 3(4), 484–501. https://doi.org/10.1177/2515245920951747
Giglio, S., Kelly, B., & Stroebel, J. (2021). Climate finance. Annual Review of Financial Economics, 13, 15–36. https://doi.org/10.1146/annurev-financial-102620-103311
Gopinath, G., Boz, E., Casas, C., Díez, F. J., Gourinchas, P.-O., & Plagborg-Møller, M. (2020). Dominant currency paradigm. American Economic Review, 110(3), 677–719. https://doi.org/10.1257/aer.20171201
Guru, B. K., & Yadav, I. S. (2019). Financial development and economic growth: Panel evidence from BRICS. Journal of Economics, Finance and Administrative Science, 24(47), 113–126. https://doi.org/10.1108/JEFAS-12-2017-0125
Haini, H., Razak, L. A., Wei Loon, P., & Husseini, S. (2023). Re-examining the finance–institutions–growth nexus: Does financial integration matter? Economic Change and Restructuring, 56(3), 1895–1924. https://doi.org/10.1007/s10644-023-09498-5
Hair, J. F., Risher, J. J., Sarstedt, M., & Ringle, C. M. (2019). When to use and how to report the results of PLS-SEM. European Business Review, 31(1), 2–24. https://doi.org/10.1108/EBR-11-2018-0203
Hayes, A. F. (2022). Introduction to mediation, moderation, and conditional process analysis: A regression-based approach (3rd ed.). Guilford Press. https://www.guilford.com/books/Introduction-to-Mediation-Moderation-and-Conditional-Process-Analysis/Andrew-Hayes/9781462549030
Ilhan, E., Sautner, Z., & Vilkov, G. (2021). Carbon tail risk. The Review of Financial Studies, 34(3), 1540–1571. https://doi.org/10.1093/rfs/hhaa071
Intergovernmental Panel on Climate Change. (2023). Climate change 2023: Synthesis report. Contribution of Working Groups I, II and III to the Sixth Assessment Report of the Intergovernmental Panel on Climate Change (Core Writing Team, H. Lee, & J. Romero, Eds.). https://doi.org/10.59327/IPCC/AR6-9789291691647
International Energy Agency. (2024). World energy investment 2024. https://www.iea.org/reports/world-energy-investment-2024
International Monetary Fund. (2022). Review of the institutional view on the liberalization and management of capital flows (Policy Paper No. 2022/008). https://doi.org/10.5089/9798400204593.007
Krueger, P., Sautner, Z., & Starks, L. T. (2020). The importance of climate risks for institutional investors. The Review of Financial Studies, 33(3), 1067–1111. https://doi.org/10.1093/rfs/hhz137
Lakens, D. (2022). Sample size justification. Collabra: Psychology, 8(1), Article 33267. https://doi.org/10.1525/collabra.33267
Lane, P. R., & Milesi-Ferretti, G. M. (2018). The external wealth of nations revisited: International financial integration in the aftermath of the global financial crisis. IMF Economic Review, 66(1), 189–222. https://doi.org/10.1057/s41308-017-0048-y
Listo, A., Saberian, S., & Thivierge, V. (2025). Finance and green growth: A comment on De Haas and Popov (2023). The Economic Journal, 135(667), 1021–1023. https://doi.org/10.1093/ej/ueae108
Maggiori, M., Neiman, B., & Schreger, J. (2020). International currencies and capital allocation. Journal of Political Economy, 128(6), 2019–2066. https://doi.org/10.1086/705688
McNeish, D. (2018). Thanks coefficient alpha, we’ll take it from here. Psychological Methods, 23(3), 412–433. https://doi.org/10.1037/met0000144
Miranda-Agrippino, S., & Rey, H. (2020). U.S. monetary policy and the global financial cycle. The Review of Economic Studies, 87(6), 2754–2776. https://doi.org/10.1093/restud/rdaa019
Nassani, A. A., Imran, M., Khan, S., Zaman, K., Khan, H. U. R., & Haffar, M. (2025). Financial integration and economic growth: Impact of renewable energy investments, technology transfer, and climate change on Europe and Central Asian economies. Financial Innovation, 11(1), Article 41. https://doi.org/10.1186/s40854-024-00733-0
Organisation for Economic Co-operation and Development. (2023). OECD guidelines for multinational enterprises on responsible business conduct. OECD Publishing. https://doi.org/10.1787/81f92357-en
Pástor, ?., Stambaugh, R. F., & Taylor, L. A. (2021). Sustainable investing in equilibrium. Journal of Financial Economics, 142(2), 550–571. https://doi.org/10.1016/j.jfineco.2020.12.011
Pástor, ?., Stambaugh, R. F., & Taylor, L. A. (2022). Dissecting green returns. Journal of Financial Economics, 146(2), 403–424. https://doi.org/10.1016/j.jfineco.2022.07.007
Pedersen, L. H., Fitzgibbons, S., & Pomorski, L. (2021). Responsible investing: The ESG-efficient frontier. Journal of Financial Economics, 142(2), 572–597. https://doi.org/10.1016/j.jfineco.2020.11.001
Rodrik, D. (2018). Populism and the economics of globalization. Journal of International Business Policy, 1(1–2), 12–33. https://doi.org/10.1057/s42214-018-0001-4
Rohrer, J. M. (2018). Thinking clearly about correlations and causation: Graphical causal models for observational data. Advances in Methods and Practices in Psychological Science, 1(1), 27–42. https://doi.org/10.1177/2515245917745629
Rohrer, J. M., Hünermund, P., Arslan, R. C., & Elson, M. (2022). That’s a lot to process! Pitfalls of popular path models. Advances in Methods and Practices in Psychological Science, 5(2), Article 25152459221095827. https://doi.org/10.1177/25152459221095827
Rönkkö, M., & Cho, E. (2022). An updated guideline for assessing discriminant validity. Organizational Research Methods, 25(1), 6–47. https://doi.org/10.1177/1094428120968614
Sarstedt, M., Hair, J. F., Jr., Cheah, J.-H., Becker, J.-M., & Ringle, C. M. (2019). How to specify, estimate, and validate higher-order constructs in PLS-SEM. Australasian Marketing Journal, 27(3), 197–211. https://doi.org/10.1016/j.ausmj.2019.05.003
Sethi, D., & Acharya, D. (2018). Financial inclusion and economic growth linkage: Some cross country evidence. Journal of Financial Economic Policy, 10(3), 369–385. https://doi.org/10.1108/JFEP-11-2016-0073
Shapiro, J. S. (2021). The environmental bias of trade policy. The Quarterly Journal of Economics, 136(2), 831–886. https://doi.org/10.1093/qje/qjaa042
Shi, D., & Maydeu-Olivares, A. (2020). The effect of estimation methods on SEM fit indices. Educational and Psychological Measurement, 80(3), 421–445. https://doi.org/10.1177/0013164419885164
Tang, D. Y., & Zhang, Y. (2020). Do shareholders benefit from green bonds? Journal of Corporate Finance, 61, Article 101427. https://doi.org/10.1016/j.jcorpfin.2018.12.001
United Nations Conference on Trade and Development. (2024). World investment report 2024: Investment facilitation and digital government. United Nations. https://unctad.org/publication/world-investment-report-2024
United Nations Environment Programme. (2023). Emissions gap report 2023: Broken record—Temperatures hit new highs, yet world fails to cut emissions (again). https://doi.org/10.59117/20.500.11822/43922
World Bank. (2017). World development report 2017: Governance and the law. https://doi.org/10.1596/978-1-4648-0950-7
World Bank. (2021). The changing wealth of nations 2021: Managing assets for the future. https://doi.org/10.1596/978-1-4648-1590-4
Zerbib, O. D. (2019). The effect of pro-environmental preferences on bond prices: Evidence from green bonds. Journal of Banking & Finance, 98, 39–60. https://doi.org/10.1016/j.jbankfin.2018.10.012
Cheng, Y. (2026). International Financial Integration and Perceived Sustainable Economic Growth Prospects: The Roles of Financial Development and Institutional Quality. International Journal of Academic Research in Accounting, Finance and Management Sciences, 16(4), 154–180.
Copyright: © 2026 The Author(s)
Published by HRMARS (www.hrmars.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