Linking green innovation, corporate environmental performance with financing constraints: a sustainable transition towards environmental protection

Authors

Syeda Fizza Abbas, Kinnaird College for Women, LahoreFollow
Iqra Tariq, Kinnaird College for Women, LahoreFollow
Fareeha Waseem, Hailey College of Banking & Finance, University of the Punjab, LahoreFollow

Abstract

Purpose: Accessing different sources of finance becomes difficult when companies fail to take action towards environmental protection. Motivated by the theoretical propositions of stakeholder theory, this research investigates the impact of green innovation (GI) and corporate environmental performance (CEP) on financing constraints (FC) in the context of the most polluting industries of an emerging economy.

Methodology: The sample is based on 33 companies from the cement, chemical and fertilizer sectors of Pakistan for the period of 2017 to 2020. For data analysis, random effects and VCE Robust regressions models have been employed to explore the link between GI, CEP and FC using two proxies; that are Kaplan-Zingale Index and Size-Age Index.

Findings: The findings confirm a significantly inverse relationship of GI and CEP with FC, contending that an increase in GI and CEP leads to a decrease in FC when KZ Index is used. Overall, companies that work on their environmental orientation through green innovation and better environmental performance face a significant reduction in financing constraints.

Novelty: This research extends the literature by comprehensively exploring the impact of GI and CEP on FC using two proxies, KZ index and SA Index, in the context of Pakistan’s three highly polluting industries.

Keywords

Corporate Environmental Performance, Financing Constraints, Green Innovation, Stakeholder theory, Random effects panel, VCE Robust regression

DOI

https://doi.org/10.54784/1990-6587.1543

Journal of Economic Literature Subject Codes

Q51, Q55, Q56, G39

Creative Commons License

This work is licensed under a Creative Commons Attribution 4.0 International License.

Recommended Citation

Abbas, S., Tariq, I., & Waseem, F. (2023). Linking green innovation, corporate environmental performance with financing constraints: a sustainable transition towards environmental protection. Business Review, 18(2), 20-31. Retrieved from https://doi.org/10.54784/1990-6587.1543