The Impact of Total Assets and Renewable Energy Consumption on the Financial Performance of Renewable Energy Industry: An Analysis of the MENA Region

In pursuance of sustainable development, the new global focus on clean energy sources over the past 50 years has put mandates on countries to shift their consumption towards various new and clean sources. Developed countries were able to adapt swiftly to those mandates, and many have become pioneers in renewable energy and technologies, with a substantial portion of their electricity mix coming from clean energy sources in recent years (IEA, 2021). However, developing countries did not have the economic infrastructure to adopt clean energy sources as fast. Several studies investigated the impact of total assets on ROE, and the impact of renewable energy consumption on the financial performance of renewable energy companies to prove the significance of the relationships, but the studies within the industry and on developing countries are limited. This paper analyzes the impact of the companies’ asset size and renewable energy consumption, on the financial performance of renewable energy companies in selected countries of the Middle East and North Africa (MENA) region. The study covers four MENA countries; Saudi Arabia, Oman, Tunisia, and Turkey. Additionally, data is extracted for four developed countries: Norway, Hong Kong, Germany, and Switzerland. The developed countries’ data is used to compare the impact of total assets and renewable energy consumption between developed and developing countries. Using annual data that covers the period 2012-2021, the impact of the size of clean energy companies and renewable energy consumption on the financial performance of the clean energy industry in MENA countries will be analyzed. The study is conducted through a panel analysis of secondary quantitative data. To do so, the data is investigated and modelled through fixed effects and random effects model, before examining the data through Feasible Least Squares (FGLS) Test. The outcome of this paper sheds light on the significance that the variables have on the growth of the renewable energy industry, and the progress MENA countries have made towards clean energy. Sustainable development is an important steppingstone for all countries, and this paper will aid policy makers put economic policies in place.