Unleashing the Indirect Inuence of FDI in Environmental Degradation via Financial Development and Economic Growth. New Evidence from Asian Countries

Scholars in developed and emerging economies have widely tested the interactions between foreign direct investment, nancial development, economic growth and environmental degradation. Despite a number of empirical and review studies, it is not yet wrap up either the associations are negative, positive, direct or indirect. Additionally, minor attention is given to the indirect role of foreign direct investment in environmental degradation; perhaps no study has yet demonstrated the mediating role of nancial development and economic growth between foreign direct investment and environmental degradation in Asian economies. Referring to the fragmented outputs and consequences as well as lacking the indirect role, the present study examines the inuence of foreign direct investment on environmental degradation with the mediating role of nancial development and economic growth. Results: Secondary data of 21 Asian countries from 1980-2018 were gathered from World Bank Indicators and then performed STATA to test the paths. Our ndings are slightly different from the studies conducted in developed economies. The results indicate that foreign direct investment signicantly improves environmental quality by deteriorating environmental pollution. It also signicantly improves economic growth in the selected regions. Surprisingly, our study shows that foreign direct investment has a signicant negative inuence on nancial development in the Asian regions. Both nancial development and economic growth signicantly negatively inuence environmental degradation in Asian regions. However, nancial development partially mediates while economic growth does not play any mediating role between foreign direct investment and environmental degradation in the Asian countries. Trade openness and population growth as control factors do not show any signicant role in the model. the nancial and an effective


Introduction
Environmental Degradation (ED) is the depletion of natural resources such as soil, water and air that damages the ecosystem, habitats destruction; eliminates wildlife; and pollution. Over the past 50 years, ED has become a global issue and every country (e.g. developed and developing) faces the dangers. For instance, as pointed out by Gorus and Aslan [1] after the second half of the 20 th century, climate change and global warming have been the sternest environmental complications. The greenhouse effect is the topmost suspicious in these two interrelated glitches. CO 2 has been signi cantly increased and has challenged management skills and market growth [6]. Therefore, the ndings will bene t policymakers to encourage the in ow of FDI toward emerging economies.
This research contributes to The Kuznets curve hypothesis and Pollution haven hypothesis [42]. The Kuznets curve hypothesis claims that as an economy grows, market forces increase and then gradually declines due to economic inequality. It alternatively demonstrates that when foreign investors perceive a high growth in an economy, they tend to invest in the industrial sector that also bene ts environmental activities in the host nation. Pollution heaven hypothesis demonstrates that when large rms/organizations/a nation aims to set up their operational and environmental activities in other markets, they need cheap resources and support [42]. In our study, we perceive that FDI can provide such advantages to the host rms to settle their business activities and to participate in environmental activities.
Theoretical Background Considering the conceptual model of the study, it is worthy to scope all the relevant theories that can partially or fully support the paths. Therefore, the most relevant theories aligned with our model are EKCT and pollution heaven hypothesis. Both theories are stated in a proper way to display the links among the factors. Simon Kuznets [43] was the rst one who proposed the Kuznets curve hypotheses, displays that as an economy develops, preliminary variation increases and later slowly shrinkages [43]. Researchers link this phenomenon to the positive signals for investors who see intend to invest in a country that is growing and have more investment opportunities [6, 44,45]. This, in turn, advantages environmental quality and protection. The Kuznets curve line displays that when a nation experience industrialization and agriculture mechanization, the economic epicenter of the state will exchange to urban areas [6,46]. Hence, farmers incline to gather into big cities for the purpose of getting highly paid jobs. It means there is a big gap and inequality between rural and urban areas. Since the urban population becomes rich while the rural population shifts toward poverty because rms' owners enjoy higher pro t over labors in a particular industry. Nevertheless, the gap (inequality) then drops when EG touches the peak theme of mediocre revenue and the wellbeing of the nation reach from development to democratization, assists high growth and leading to an upward GDP per capita. Kuznets describes that inequality would have a tendency like an overturned Ushape as it rst improves and then declines along with the increased of GPD. In fact, the Kuznets curve demonstrates an inverted U-shape curve, many predictors with axes that are normally matched and jointed, such as the Gini coe cient on the Y-axis and GDP and time and ED on the X-axis. With the passage of time and around a few decades later, Grossman and Krueger, [47] tested this premise in the environmental context. It displays that ED and economic development have an upturned U-shaped association which is referred to as the Environmental Kuznets curve theory (EKCT). For instance, the EKCT describes that ED and scal progress have a positive association. When a nation growing in the rst phase, the living standard of people may be the expenditure of the atmosphere. But on the achievement of high economic growth, uncertainties about the ecosystem and environment begin ( Figure 1). The reversed U-shaped results of the EKC curve is supported by many empirical pieces of evidence such as Sha k [48] and [49]. It has become very popular in shaping ecological strategy. Onafowora and Owoye's [50] claimed that the long-run connection between ED and economic development presents an N-shape. However, Al-Mulali and Ozturk [51] shown a U-shaped association between ED and GDP.
How EKC works in an economy over time is described in Figure 1. It demonstrates that a country becomes an economic ladder, the in uence of the growth can cause an upturn in ED. It is the portion of the Kuznets curve before E point (a rotating point), there is a rational and useful logic behind a growing economy displaying an upward ED. As income increasing (due to FDI) in an economy, its production level will increase. The bene ts of high production facilitate the economy in the ED. In Figure 1, point E is the turning point which shows that ED makes a U-turn and declines as EG upsurges. However, after point E, despite an upward shift in the income, ED moves to deterioration, and the EKC ends up as an inverted U-shape association. Apergis et al. [52] collected evidence from mixed regions and indicated an interconnection among energy practice, emissions, and income. Another data sample of high, middle and low-income countries displays an inverted U-shaped relationship between emissions and income economies and has supported the EKC theme [53]. Regarding EKC, the idea of the pollutionhavenhypothesis is worthy. According to the hypothesis, in a country where there are strict environmental regulations, it is expensive for big businesses to achieve environmentally worsening maneuvers. In contrast, in evolving economies where environmental rules are not so strict, it is not so di cult to operate a polluting industry and labor is also not expensive. Hence most of the factories try to move to developing economies where there are less expensive labors and lower environmental regulations [54].
The second theory that is a liated with our model is "the pollution heaven hypothesis" is also discussed on this issue which describes that industries with high pollution will be shifted to the domains where less rigorous environmental regulations have existed. There are two major bene ts of FDI for a host country. First, FDI can reduce ED through technological innovation. Second, it is argued that FDI speci cally focuses on environmental issues which increase environmental pollution where polluting industries can be shifted from rich to poor nations due to lack of ecological procedures in the host nations. Hypotheses Development

FDI and Environmental Degradation
Environmental pollution has become a serious problem in developing and developed economies across the globe due to an increased level of change in industrial growth. A number of policies and strategies have been formulated to enhance the environmental quality [55][56][57]. Despite active engagement and programs, many countries, especially from Asia, have failed to gain satisfactory environmental performance [31,58] due to a de ciency of resources and support [25,59]. In this case, out of several indicators, FDI has been considered a signi cant predictor of ED [3,8,57]. However, there is a controversial documentary on the role of FDI in the ED. For instance, it is argued that the effects of the FDI can go any way, such as they may have positive effects in the form of the sustainability and FD of the economy, but at the same time they have negative effects on the environmental phenomena of the country. However, it depends on the sector, the FDI is targeting. Considering these backgrounds, there may be three different hypotheses related to these relationships between the FDIs and the environmental hazards, such as the rst one is the pollution haven hypothesis, the next one is the pollution halo hypothesis, and nally the third one is the scale effects hypothesis [28]. Theoretically speaking, there could be a myriad of different belongings of the FDI on the environmental dimension of the nation. For example, these FDIs would affect the quality of the environment, however, the empirical evidence in this regard as divergent. For example, in China, an empirical study demonstrated that one of the major consequences of the FDIs is the high levels of emission of the CO 2 [6].
These results are contrary to the opinions of [28] who analyzed the BRICS and argued that the FDI is more effective in developing greener technologies, which bene ts the host countries, which ultimately improves the overall environmental conditions of the host country. Supplementing to this discussion, [29] while considering the China at regional level units of analysis demonstrated the positive effects of the FDI on the environment such as improved and greener technologies, while on the same time, [31]and [32] while considering the City-Level data from China also reports that there are severe negative consequences of the FDI on the environmental deterioration, such as increased range of CO 2 emissions in the areas received higher levels of the FDIs. Such contradictory results, even from a single country warrants more detailed studies considering the effects of the FDI on the environmental conditions of the countries. Furthermore, the evidence forms the other developing countries also report that although the FDI illustrates a favorable link with the EG of these countries, at the same time they have severe negative effects of the FDI on the EDs, particularly, in Malaysia [33] and Taiwan [34].
More surprisingly, in Taiwan, income and FDI are the two major contributors to the increased level of CO 2 emissions [30]. While expanding the sample to other countries, particularly, the ASEAN countries, such as 5 countries, also suggests that the increased level of the FDIs results in a high range of energy expenditure,  [71] highlighted that there is a reverse causality between the FDIs and the CO 2 , and the only exception to these results are the Europe and North Asia. Considering these contradictory ndings in the existing literatures, it is the need of the time to conduct a detailed study to consider the regional -level data (considering the similarities between the countries in the region), as well as the country -level (Considering the heterogeneities among the countries) to see their differential effects on the FDI and CO 2 relationships. Hence, we posit; H1. Asian countries with a higher level of FDI have a low level of Environmental Degradation

FDI and Financial Development
It is a famous marvel that an increased level of FDI will result in an effective FD system [72]. Theoretically, the nexus between the foreign direct in ow and the FD has been analyzed extensively in the early 1980s, for example, [73] examined the role of the FD of the country to encourage the FDI. They demonstrated and concluded that the antecedents of the FDIs are not related to the FD level of the country instead it is the necessary condition, not the su cient one. As there are some other factors that are to be considered while assessing the effects of the FD levels of the country and the foreign direct in ows it receives. They further argued that the FD system is necessary but not a su cient condition for a country to encourage foreign investment in the new technologies. It is also important to consider the nancial liberalization while considering the role of the FD in attracting the FDI ows. However, the presence of nancial liberalization limits the role of FD to attract more FDI in ows. Nevertheless, the studies abound, which established the positive relationships between the FD of the country and the FDIs it receives [36,74]. These results imply that the more the nancial markets are stable in the economy more are the more chances they received the FDIs to augment their EG while capitalizing on the prevalence of the strong nancial markets indigenously.
There is an important and long debate on the role of the institutions in the performance of the nancial markets and the EG of the country. For example, [75] argued that the institutions and the nancial markets work hand to hand in the betterment of the economy, and emphasized on the role of the institutions, which ensures the performance of the nancial markets. Similarly, [76] exhibited through a cross-country analysis, that FDIs affect positively the certain components of economic freedom, but not all of them. While considering these arguments, we considered thoroughly the roles of the other institutions such as the political risks which could be the important factor in affecting the relationship between the FD and the FDIs of any country. This could be due to the political instability which creates more uncertainty in the country and would be doubting the continuation of the policies of the incumbent governments. The literature is abundant with the cross-country research which are based on the data available internationally particularly about the impact of the policy-related factors such as the intellectual property protection (IPP), the prevalent corruption situations and both the institutional and non-institutional uncertainties posed to the country, on the FDI in ows [77] [78].
In addition, further numerous scholars have considered the effects of the autonomous associations on the FDI in ows, which is diverse in nature, for example, one strand of thoughts showed that the association between the FDI and the democratic institutions is positive [72,79,80]. Li and Resnick,[81] argued that though democratic rights have an indirect positive effect on the FDI in ows which could be attributed to the improvement in a speci c dimension of the institutional improvements, particularly, by improving the property rights protection prevailing in the country, in these situations the direct impact on FDI is negative.
Furthermore, political (in)stability like government (in)stability, rule of law, absence of the internal and the external con icts, citizen's basic democratic rights and an e cient law and order system, all together affects the FDI in ows [72]. They further exhibited that the investors willing to invest their capitals are always susceptible to the un-anticipated variations in the political steadiness of a nation, these uncertainties and the un-anticipated changes in the national and international relations of the developing economies are very prominent. Although the developed countries are reasonably more stable as compared to the developing countries, the former still expect some other factors which could affect the FDIs [72]. In these circumstances, the multi-disciplinary studies are more instructive and useful to consider. For example, according to law and nance-related literature, the institutions which are a source of satisfaction for the investors are considered more effective to predict the FDI, such as those institutions which provide investors a sense of protection have been proved crucial for FD of the economies because they attract more FDIs. According to Roe and Siegel [82], political stability shows a crucial role and major role in in uential the country's capacity to develop and prosper investment protection programs. They further argued that most of the time the politically unstable governments fail to believably obligate to the policies that could encourage and develop any entrepreneurial occupations and the protection of the nancial markets. In this backdrop, it is easy to con gure the role of the political stability in the studies aiming to examine the causal linkages between the nancial markets, FD and the FDI in ows. Since these phenomena are more prevalent in the developing countries, it is very important to consider the developing countries to assess and examine the role of the nancial markets, and FD stages on the FDI in ows. Therefore; H2. Asian countries with a higher level of FDI have a high level of Financial Development

FDI and Economic Growth
To have a high EG and stable economic system, countries need su cient resources, and especially in emerging economies, this goal can be achieved through FDI [37] [90,91] argued that while considering the diminishing returns on the capitals in the developing economies would suggest the higher returns on the capitals, which further strengthen the arguments of the ow of the capital from the developed to the underdeveloped economies. This ow of capital would support the latter is catching up on the pace of the growth. These arguments further motivated the developing economies to attract more FDI to boost their economies. In contrast, the empirical results suggests other way around; such as Abramovitz [92] and Solow [93] demonstrated that the long-run growths are the results of the technological advancement, rather than the nancial investment from the foreign sources. In addition, another contradiction was that the argument of the ow of capital from the rich to the poor economies was also overemphasized (e.g., [94,95]. studies, which still could not provide any proof of the progressive association between the FDI and the domestic total factor production of the sample of more than 100 countries (for example, [37,103]. Therefore; H3. Asian countries with a higher level of FDI have a high level of Economic Growth

Financial Development and Environmental Degradation
An effective FD can help the nation with a clean and quality environment [104]. Hence, it is very important for a country to enjoy the fully functional and optimal nancial market in order to achieve the desired level of environmental performance [105]. However, sometimes, overemphasizing the nancial markets only may overshadow the other important dimension of the overall economy, such as environmental and ecological development. It is unequivocally accepted across the globe, that there is a tradeoff between the EG and the and FD [59]. In the latest study, the top-performing countries in the list of the Renewable Energy Attractiveness Index (REATI) exhibited a positive association between the FD levels and the environmental quality [113].
The second stream of research supports the idea of the adverse effects of the FD on environmental quality.
They propagate that the FD causes more energy consumption, which ultimately results in the emission of high levels of CO 2 , which deteriorates the overall environment. For example, multiple studies exhibited and supported this assertion in different countries, such as in China [114] in Indonesia [105]  Finally, the third stream of research which is indifferent as far as the association between the FD and the environmental deterioration is concerned and exhibited no association between these two. For instance, Ozturk and Acaravci [117] while examining the association between FD and the CO 2 emission exhibited no association in the long-run in Turkey. Similarly, in 12 MENA countries, the association between these two is neutral [118], however, for 6 GCC countries, the results are mixed for association between the FD and the CO 2 emission levels [119]-such as the association is positive in Saudi Arabia, Kuwait, Bahrain and Oman; while there is negative association between FD and CO 2 emission in Qatar and the United Arab Emirates.
Furthermore, in a single country study, such as only focusing on UAE, there is an inverted-U association [120].
However in the developed economies, the results are mixed, for example, in the 27 European Union countries, the results display not connection between the energy costs levels and the FD; while using the bank index, the association between the FD and the CO 2 emission exhibited an inverted-U shaped association between them, however, insigni cant relationship between them when they are assessed based on the stock-index [121]. These results imply that not only the measurement of the FD is important while studying the effects of the FD on the environment, but also the country level heterogeneous characteristics are also important, which should be considered while assessing the association between the FD and the CO 2 emission levels. Hence;

H4. Asian countries with a higher level of FD have a low level of Environmental Degradation
Economic Growth and Degradation of the Environment A country needs an effective EG model that is required to degrade environmental pollution [122]. There are myriad of the measurement tools available to gauge the EG of a country, but what is very often used, is the changes in the GDP, which is the gross domestic product of the country with reference to the previous year.
Regardless of the measurement variation, the uniqueness lies in the phenomena is that it is a very important concern of the economies, particularly the macroeconomic planning and policy-making after the emergence of the capitalist economies after World War-II see, [123] for details. Policymakers are aimed to achieve consistent improvement in the GDP over time, but there are ways some costs associated with everything to be achieved in the international phenomena, and the GDP is no exception. Such as the consistent growth in the GDP may bring some negative changes to the overall situation of the country. For example, with more development which is the cornerstone of the GDP growth, there are more energy consumption and more natural resources consumption which creates an imbalance in the natural environment of the country. A major concern of the environmentalists is the environmental deterioration of the country, which is overshadowed by the GDP growth. Empirical evidence has abounded which examined the association between the GDP growth and the environmental deterioration of a country by capitalizing on the Environment Kuznets Curve (EKC) [54]. Simon Kutz [54] argued that there is an inverted U shaped relationship between the GDP growth and the environmental deterioration, such as the GDP growth would deteriorates the environment in the long run, however, after reaching the peak of the GDP growth, which is very often gauged in terms of the per capita real GDP, it improves the environment by reducing the ED. This inverted U shaped relationship between the GDP growth and the environmental deterioration makes this association too complex to grasp it easily. This ambiguity is evident from the existing results on the relationship between the two variables, such as Apergis [52]examined the association between the per capita GDP growth and the CO 2 emission levels in 15  Korea, showed that only South Korea and Japan showed the environmental Kuznets Curve. Further to that inverted U shaped curve, some of the countries exhibited an N-shaped curve between the GDP growth and the emission level of CO 2 . These differences in the relationships can be related to the different development stages of these countries, since they are heterogeneous as far as their economic development and GDP growth is concerned. Similarly, in a 43-country panel study (which included Middle Eastern and ASEAN countries) exhibited a positive association between the income levels of the household and the CO 2 emission, however some countries showed totally different results despite the fact all of them were developing countries. The factors which contributes to the heterogeneity in the relationships between the GDP in the CO 2 emission needs to be explored further in order to guide the policy makers in the right directions while formulating the policies for the achievement of the targets of the EG.
There are different comparative studies that considered the different sets of countries to see the relationships between the GDP and CO 2 emission from the perspective of the different income levels. One such study considered 26 OECD economies which were characterized as having high levels of income on the one hand and another group of 52 emerging economies, which were having a low level of incomes [44]. The results showed both the N-shaped and inverted N-shaped relationships between GDP growth and environmental deterioration. These results contradict the EKC hypothesis which is established by other authors in other sets of countries. These results suggest that environmental quality and conditions are not solely relying on the GDP growth of the countries, besides the differences in the countries warrants more insights into the relationships. The heterogeneity prevails in both scenarios such as i) when countries' development stages are different, ii) when the countries' development stages are not different. For example, a 27 advanced country panel study exhibited an inverted U-shaped relationship between the GDP growth and the environmental deterioration [124], while studies on the Chinese Region [45] and the US [125] showed mixed results about the establishing the environmental Kuznets Curve hypothesis. Considering all these disparities and the ambiguities in the association between the GDP growth, FD and the environmental deterioration, whether these differences prevail in the different groups of countries, such as developing versus developed countries, or are there some other factors which make them exhibit different pattern of relationship between the GDP growth and the environmental deterioration. In this context, the comparative studies while taking the countries in groups based on the developing and developed countries groups, which could ascertain the between-group and within-group differences in the relationship between the GDP growth and the environmental deterioration hypotheses. Hence,

H5. Asian countries with high EG growth have a low level of Environmental Degradation
The mediating role of FD and EG FDI is the cornerstone of the EG of any country regardless of its development stage. FDI is undoubtedly a very important factor in the sustainability of developing countries. However, there may be some hazards caused by these FDIs, which could be more than the bene ts it gives to any economy. Literature has claimed that FD is a signi cant predictor of ED [31]. However, in the discussion, both negative [33,34] [127] argued that the link between FDI and environmental pollution is affected in the presence of human capital. Furthermore, as Opoku, Ibrahim and Sare [128] claimed that FDI is a signi cant positive driver of EG that in turn can reduce ED [44,123]. Favoring this notion, Kalai and Zghidi [129] claimed that FDI has a long-lasting favorable in uence on EG and development that is bene cial for ED [37]. Consequently, FDI is very essential for high EG and development [130] and such types of development can in turn signi cantly attenuate environmental pollution, environmental problems and ED [59,111]. Additionally, an increased level of FDI will improve the distribution of private credit in a country. There will be adequate nancial resources for business rms to participate in environmental activities. Because the lack of nancial resources hampers the participation of business industries in environmental activities [131]. Indeed, adequate nancial resources are very fruitful for venture operational activities. If a venture receives satisfactory nance and capital in a country (e.g. from government, FDI or nancial institutions), it will smooth its operational activities and will able to achieve sustainable competitive position [132] and in turn, there will be a strong possibility to participate in the environmental activities. As pointed out by Dutta and Roy [133], the in ow of FDI helps the economy to increase the ratio of public credit to the industrial sector. It reveals that FDI is a signi cant predictor of FD. Additionally, Otchere, Soumaré and Yourougou [134] revealed that FDI plays a backbone role in the productive sector and improves the production level of various industries because they receive adequate nancial resources. In turn, FD signi cantly improves environmental quality [135]. Sirag, SidAhmed and Ali [136] claimed that the relationship between FDI and economic performance is affected by FD in many nations. Hence, there will be effective strategies for the in ow of FDI in order to spur FD and EG because both are very crucial for environmental quality [13]. So it is perceived that FDI will not directly in uence ED but it will rst enhance FD and EG that in turn will signi cantly in uence ED.
H6. The path between FDI and ED is mediated by FD in Asian countries.
H7. The path between FDI and ED is mediated by EG in Asian countries.

Methodology Data and Sample
We used secondary data to test the relationship between FDI, EG, FD and ED in the Asian countries. The reason for choosing the speci c Asian countries is the fragmented results scrutinized by numerous studies. Moreover, they face serious environmental pollution problems because of the lack of policies for environmental practices. We gathered data from the World Bank Indicators (WBI) from 1980-2018). The variables of the study are discussed below. FDI: It is the ratio for investment by foreign countries in a host country. The investment is done for several reasons including environmental safety and trade.
Environmental Degradation: Normally considered as Carbon Emission CO 2 it is the logarithm of carbon dioxide emissions. The above model indicates ED or CO2 that are considered the most used measure in existing literature for ED (see [105,137].
Financial Development: For FD, the proxies; domestic credit, liquid liability and private credit are mostly used in the literature [108,118]. However, most of the studies suggested the domestic credit as a useful and valid proxy for FD in Asian regions [138,139]. In other words, the proxy used for FD measured is the annual ow of domestic credit to the private sector as a ratio of GDP and is one of the most extensively used indicators in the present literature see [138,139] among others. It indicates the amount of credit abstracted by nancial intermediation from savers to the private sectors. Several studies have used the measures when they tried to examine the relationship between FD and environmental issues [105,109,111]. Therefore, we relied on this proxy to measure the FD.
Economic Growth: Proxy uses for GDP e.g. in constant 2010 US $.

Model Speci cation
The algebraic model of the study is presented below:

Model
Explanation Path We performed descriptive statistics in SPSS The results of descriptive analysis shows (see table 2) that EG has the highest Mean value 27.17 while FD has the lowest 1.57. EG has also the highest SD 9.93 while FD has the lowest SD 0.42. Additionally, the normality test shows that the distribution of data is normal as none of the constructed value exceeds the threshold value of + 2 for both skewness and kurtosis as per the suggestion of [140]. Furthermore to check the problem of Multicollinearity in the data we executed the Variance In ation Factor (VIF) in Stata. The results of the VIF were reported in Table 2. We con rmed the absence of multicollinearity in the data set as none of the factors has a VIF value above 10 [141]. To obtain the evidence on the relationship among variables. We estimate the correlations coe cient. The correlation estimation with the p-value is given in Table 3. The results of correlation coe cient indicates that FDI and FD are signi cantly positively related to ED (r=0.211, p<0.05, (r=0.112, p<0.05), while ECG is insigni cantly related with ED (r=0.0642, p> 0.05).Furthermore, there is a signi cant positive association between FDI and ECG (r=0.0261, p<0.05). The relationship between FDI and FD is found insigni cant (r=-0.017, p>0.05). The correlation table supported our argument about the absence of multicollinearity as scholars such as [142] suggested the potential collinearity problem exists if the correlation coe cient is more than 0.8 however in this the highest values are 0.26 among the Df and ECG.

Panel unit root test results
In spite of the fact that the mostly used test is the unit root test in economic and business studies. Moreover, the panel unit root test has become signi cantly popular among scholars due to it's over other tests that are used for normal time series unit root. In this, speci cally the Im, pesaran will be used in this study. Those tests are used to derive a panel speci c result. The unit root test speci es a separate ADF regression for each cross-section. The test has the following null and alternative hypotheses. H0: The variable is not stationary or got unit root.
Page 16/31 H1: variable is stationary Table 4 indicates that the unit root test outcome and clearly shows that most of the level of the variables are not stationary, but only the population growth variable is stationary. However, the ndings revealed that the variables are stationary at the rst variance refusing the null hypothesis representing that the variables exists a panel unit root.  F-test value and its P-value F-test basically tells us to wither there is an individual speci c effect or not. We test the following null and alternative hypotheses Ho: Individual speci c effect is equal to zero.
H1: Individual speci c effect is not equal to zero.
It is clear from Table 3 that F-test is equal to all u_i=0 its mean that all individual-speci c effect is equal to zero and it's p-value = 0.0000. so it's mean that on the basis of the xed-effect model and on the basis of Ftest value we reject the alternative hypothesis that there is not individual speci c effect and accept the null hypothesis. so that is in the favorer of the xed-effect model.
The Breusch-Pagan Lagrange multiplier test examines if any random effect exists or not.
We test has the following null and alternative hypotheses.
Ho: Individual speci c or time speci c error variance components are equal zero.
H1: Individual speci c or time speci c error variance components are not equal to zero. Table 5 shows that the p-values associated with the chi-square statistics are zero. Thus we cannot reject the null hypothesis. Therefore, we nd that the Individual speci c or time-speci c error variance components are equal zero, suggesting that the random effect model is appropriate

Testing Hypotheses
To do the mediation analysis, we performed four steps method suggested by Baron and Kenny [143]that have discussed in Table 6. So to follow the Baron and Kenny [143] procedure of mediation in rst model IV was regressed on DV. The results of model 1 (see Table ) show that FDI has a negatively signi cant in uence on ED (β = -0.448, p < 0.05) which favored H1. In the second and third models, IV was regressed on the mediator. R squire value shows a 57% variation in ED that is explained by FDI when the mediating role played by ECG.  [42]. For instance, The Kuznets curve hypothesis describes that as the economy grows, market forces increase and then gradually decline due to economic inequality. One of the major explanations of this theory is that when foreign investors perceive a high growth in an economy, they tend to invest in the industrial sector that also bene ts environmental activities in the host nation. Our results partially support this theory because we found that FDI is crucial for EG but in results, it does not improve environmental quality. However, our study favors the pollution heaven hypothesis, which displays that when large rms aim to set up their operational and environmental activities in other markets, they need cheap resources and support [42]. Our results con rm that FDI provides advantages to the host rms to settle their business activities and to participate in environmental activities.
Our study revealed that FDI has a signi cant negative in uence on ED in Asian economies. Our results favor some studies as well as also oppose many studies in the context. For instance, our study supports Shahbaz et al., [105] who revealed that an increased level of FDI can result in environmental quality and a low level of environmental pollution. Similarly, Hu, Wang, Lian and Huang, [126] also tested the prominence of FDI in environmental activities and revealed that Asian countries get many advantages of FDI for environmental and sustainability practices. However, on the other hand, our results do not match Solarin and Al-Mulali [57] who claimed that FDI has not a signi cant in uence on ED especially in developed economies because of dirty pollution, it is di cult to enhance the environmental cleanness. Surprisingly, our ndings revealed that FDI negatively in uences FD in the Asian regions. Our ndings partially support McKinnon and Shaw [144] who claimed that FDI does not signi cantly improve FD in a country due to several unfavorable conditions. Therefore, a country needs strong nancial liberalization policies to boost the FDI in ow in a better way that con gure FD. Dutta and Roy [133] also claimed that sometimes due to the political instability, a country's FD system is not performing satisfactorily despite having su cient FDI. Favoring the arguments, we argue that political conditions in the Asian regions are not stable and not effective. However, the hypothesis for a signi cant positive relationship between FDI and EG is supported by this study. The ndings con rm that the economy in emerging and Asian countries can be improved by increasing the in ow of FDI. Our results further con rmed that FD and EG signi cantly negatively in uence ED in the Asian regions. It scrutinizes that effective FD and high EG are signi cant predictors of environmental activities and sustainability in the Asian regions. Our ndings support several studies that have scrutinized a signi cant negative association between FD and ED [105,111,115,116] and a signi cant negative association between EG and ED [145][146][147]. These studies have inspected that a country with stable FD and high EG can reduce environmental pollution.
Our study displays a partial mediating role of FD between FDI and ED. It is because the in ow of the FDI is mainly used from ED rather rst cross and distributed in the industrial sector. Partially supporting Otchere, Soumaré and Yourougou [134] who stated that FDI is very crucial for EG and stability that in turn results from the environmental performance. Our study shows that FDI equally improves FD and environmental quality in the Asian regions. However, our research depicted that EG is not a signi cant mediator between FDI and ED in the Asian regions. Unlike Shahbaz, Nasir and Roubaud, [135] who claimed that FDI signi cantly improves economic propensity and development that is vital for sustainability and environmental quality.
Our study states that EG is not a signi cant mediator but FDI directly in uences ED in the Asian regions.

Policy and Practice Implications
Our study suggests several worthwhile implications for policymakers and practitioners who are responsible for making policies related to FDI and environmental in developing and developed markets. Our study revealed that FDI signi cantly enhances environmental quality and degrade environmental pollution.
Sustainability practices and environmental performance need su cient nancial resources. Therefore, policymakers should encourage and promote the in ow of FDI in the Asian regions to enhance environmental performance. However, our research displays that FDI has a negative signi cant in uence on FD in Asian economies. Therefore, our study strongly recommends policymakers to investigate the negative in uence of FDI on FD. This may be the wrong distribution of nancial resources in the Asian regions. It is also suggested for policymakers that the distribution of FDI should be disconnected from political intervention because it can hamper the nancial distribution. Policymakers need to focus on the improvement of FD and EG because both are very crucial for environmental quality and sustainability activities. Our study scrutinized that FD is a partial mediator between FD and ED in the Asian regions. It argues that FDI has a greater in uence on ED as compared to FD that can mediate the association. However, our study displays that EG is not a signi cant mediator between FDI and ED in the Asian regions. It advocates that FDI directly in uences ED instead of rst improving EG in the Asian regions. Policymakers should investigate the path and should evaluate the strength of the association between FDI, EG and ED in the Asian regions. Alternatively, it posits that if policymakers and economists mainly emphasize ED as compared to EG, they need to encourage and promote the in ow of FDI in the region. The implications are not only constructive for the Asian countries but other neighbor countries and connected regions should also follow it to ensure environmental performance. Since several Asian economies are connected with developed markets in terms of trade and culture. Therefore, the implications can be opted in developed regions to ensure a safe environment, high EG and effective nancial system.

Limitations and Signals for Future Studies
This research assessed an important aspect that has been missed in the existing literature. However, still, there are a few limitations that can be discussed in future research work. The rst limitation of this study is to collect evidence from only Asian rms while ignoring developed rms. Hence, it will better to test a model