INVESTMENT AND FINANCING DECISIONS IMPACT ON FINANCIAL SUSTAINABILITY WITH MODERATING EFFECT OF CORPORATE GOVERNANCE INDEX: A DYNAMIC PANEL DATA APPROACH
Keywords:
Capital Structure, Capital Expenditure, Corporate Governance Index Financial Sustainability, Saudi Arabia, ManufacturingAbstract
Ensuring financial sustainability is a critical imperative for organizations seeking to maintain a competitive edge in the global marketplace. Therefore, the primary aim of this study was to investigate the impact of financing and investment decisions on the financial sustainability of manufacturing companies in Saudi Arabia, with a particular focus on the moderating influence of corporate governance practices. Data spanning from 2010 to 2022 were gathered from the annual reports of manufacturing firms, utilizing a longitudinal research design. A quantitative deductive approach was employed, and Generalized Method of Moments (GMM) was utilized for panel data analysis. The results from the GMM models demonstrated superior effectiveness compared to ordinary least squares methods. Specifically, the findings revealed that capital expenditure had a positive and statistically significant effect on financial sustainability, whereas capital structure exhibited a negative and statistically significant impact. Moreover, corporate governance index was found to positively and significantly moderate the relationship between capital expenditure and financial sustainability, while exerting a negative moderating effect on the relationship between capital structure and financial sustainability. These significant results underscore the importance of corporate governance mechanisms in shaping the financial sustainability of manufacturing firms in Saudi Arabia. This study makes a noteworthy contribution by shedding light on the moderating role of corporate governance practices within the Saudi Arabian manufacturing context, representing a pioneering endeavour within existing research. Additionally, the findings offer valuable insights for policymakers and stakeholders, emphasizing the significance of robust corporate governance frameworks in enhancing financial sustainability.