Financial Development and National Logistics Performance: The Moderating Role of Institutional Quality

Abstract

This research is concerned with the issue of translating financial resources into logistics and information-driven service effectiveness in developing and emerging Asian economies under differing institutional conditions. In particular, this study analyzes the moderating effect of institutions on the nonlinear relation between financial development and logistics performance. Applying two-way Fixed Effects models with Driscoll-Kraay standard errors, System GMM in order to deal with potential endogeneity and Panel Smooth Transition Regression (PSTR) in order to reveal possible nonlinear regime shifts to the panel data for 12 countries during the period 2007-2023 (N=75 country-year observations), one finds out that financial development positively and significantly influences logistics performance (β=0.0062, p<0.05) while institutional quality has a positive and significant effect on the dependent variable (β=0.284, p<0.01). System GMM estimation supports the obtained baseline results (FDEV β=0.0058, p<0.05; INST β=0.267, p<0.05). Nonlinearity tests performed in the PSTR model provide evidence against the hypothesis of linearity (p<0.01). At low levels of institutions, financial development is significantly positively related to logistics performance (β₀=0.0089, p<0.01), which reflects the institutional substitution effect in which state-controlled finance substitutes for institutional deficiency. When institutional quality exceeds the threshold (ĉ ≈ -0.13 WGI points), the marginal effect increases by β₁=0.0047 (p<0.05), implying the regime shift to institutional complementarities. The marginal effect increases from 0.0097 at the 10th percentile to 0.0125 at the 90th percentile of institutional quality. Such results have implications for information science, as the performance of
logistics depends not only on the physical infrastructure and financial resources but also on the ability of institutions to ensure proper information flows, transparency, coordination, and information-based service delivery.