The Influence of Green Innovation on Firm Value: The Mediating Role of Financial Flexibility
Keywords:
Green Innovation, Green Product, Green Process, Financial Flexibility, Firm Value
Abstract
This study aims to examine the effect of green innovation on firm value with financial flexibility as a mediating variable. The research was conducted on companies in the energy and basic materials sectors listed on the Indonesia Stock Exchange (IDX) during the period 2021–2023. Multiple linear regression analysis and the Sobel test were employed to evaluate the mediating role of financial flexibility. The results indicate that green innovation, when tested simultaneously, has a significant effect on financial flexibility. However, in partial testing, only the green process shows a significant impact, while the green product does not. Furthermore, financial flexibility has a significant negative influence on firm value, suggesting that increased financial flexibility may reduce firm value. Despite this, financial flexibility does not mediate the relationship between green innovation and firm value, as shown by p-values in the Sobel, Aroian, and Goodman tests exceeding 0.05. These findings imply that green innovation, particularly in business processes, can directly affect firm value, although not always positively. The study highlights the importance for companies to carefully manage green innovation strategies, especially regarding investment and operational changes, to avoid unintended reductions in firm value.
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Xie, X., Huo, J., & Zou, H. (2019). Green process innovation, green product innovation, and corporate financial performance: A content analysis method. Journal of Business Research, 101, 697–706. https://doi.org/10.1016/j.jbusres.2019.01.010
Xie, X., & Zhao, J. (2020). Analysis of the Influence of Financial Flexibility on Enterprises. Open Journal of Business and Management, 08(04), 1917–1922. https://doi.org/10.4236/ojbm.2020.84117
Agustia, D., Sawarjuwono, T., & Dianawati, W. (2019). The mediating effect of environmental management accounting on green innovation - Firm value relationship. International Journal of Energy Economics and Policy, 9(2), 299–306. https://doi.org/10.32479/ijeep.7438
Bukit, R. B., & Nurlaila. (2019). Environmental performance, voluntary disclosure, and corporate value. IOP Conference Series: Earth and Environmental Science, 260(1), 012081. https://doi.org/10.1088/1755-1315/260/1/012081
Cai, W., & Li, G. (2018). The drivers of eco-innovation and its impact on performance: Evidence from China. Journal of Cleaner Production, 176, 110–118. https://doi.org/10.1016/j.jclepro.2017.12.109
Dai, D., & Xue, Y. (2022). The Impact of Green Innovation on a Firm’s Value from the Perspective of Enterprise Life Cycles. Sustainability (Switzerland), 14(3). https://doi.org/10.3390/su14031226
Denis, D. J. (2011). Financial flexibility and corporate liquidity. Journal of Corporate Finance, 17(3), 667–674. https://doi.org/10.1016/j.jcorpfin.2011.03.006
El-Kassar, A.-N., & Singh, S. K. (2019). Green innovation and organizational performance: The influence of big data and the moderating role of management commitment and HR practices. Technological Forecasting and Social Change, 144, 483–498. https://doi.org/10.1016/j.techfore.2017.12.016
Gangi, F., Daniele, L. M., & Varrone, N. (2020). How do corporate environmental policy and corporate reputation affect risk‐adjusted financial performance? Business Strategy and the Environment, 29(5), 1975–1991. https://doi.org/10.1002/bse.2482
Grassmann, M. (2021). The relationship between corporate social responsibility expenditures and firm value: The moderating role of integrated reporting. Journal of Cleaner Production, 285, 124840. https://doi.org/10.1016/j.jclepro.2020.124840
Holz, H. F. (2024). The Resource-Based View of the Firm. In Reference Module in Social Sciences. Elsevier. https://doi.org/10.1016/B978-0-443-13701-3.00383-2
Kam‐Sing Wong, S. (2012). The influence of green product competitiveness on the success of green product innovation. European Journal of Innovation Management, 15(4), 468–490. https://doi.org/10.1108/14601061211272385
Khan, P. A., & Johl, S. K. (2019). Nexus of Comprehensive Green Innovation, Environmental Management System-14001-2015 and Firm Performance. Cogent Business & Management, 6(1). https://doi.org/10.1080/23311975.2019.1691833
Khan, P. A., Johl, S. K., & Johl, S. K. (2021). Does adoption of ISO 56002‐2019 and green innovation reporting enhance the firm sustainable development goal performance? An emerging paradigm. Business Strategy and the Environment, 30(7), 2922–2936. https://doi.org/10.1002/bse.2779
Kraus, S., Rehman, S. U., & García, F. J. S. (2020). Corporate social responsibility and environmental performance: The mediating role of environmental strategy and green innovation. Technological Forecasting and Social Change, 160. https://doi.org/10.1016/j.techfore.2020.120262
Lin, R.-J., Tan, K.-H., & Geng, Y. (2013). Market demand, green product innovation, and firm performance: evidence from Vietnam motorcycle industry. Journal of Cleaner Production, 40, 101–107. https://doi.org/10.1016/j.jclepro.2012.01.001
Liu, D., Yu, X., Huang, M., Yang, S., Isa, S. M., & Hu, M. (2022). The Effects of Green Intellectual Capital on Green Innovation: A Green Supply Chain Integration Perspective. Frontiers in Psychology, 13. https://doi.org/10.3389/fpsyg.2022.830716
Münter, M. T. (2024). Resource-Based View. In Reference Module in Social Sciences. Elsevier. https://doi.org/10.1016/B978-0-443-13701-3.00203-6
Naseer, M. M., Khan, M. A., Bagh, T., Guo, Y., & Zhu, X. (2024). Firm climate change risk and financial flexibility: Drivers of ESG performance and firm value. Borsa Istanbul Review, 24(1), 106–117. https://doi.org/10.1016/j.bir.2023.11.003
Novitasari, M., & Agustia, D. (2023). COMPETITIVE ADVANTAGE AS A MEDIATING EFFECT IN THE IMPACT OF GREEN INNOVATION AND FIRM PERFORMANCE. Business: Theory and Practice, 24(1), 216–226. https://doi.org/10.3846/btp.2023.15865
Sharma, N. (2016). Innovation in Green Practices: A Tool for Environment Sustainability and Competitive Advantage. SSRN Electronic Journal. https://doi.org/10.2139/ssrn.2861530
Sholatika, N. I., & Triyono. (2022). The Effect of Profitability, Liquidity and Leverage on Company Value with Dividend Policy as Moderating Variables on Consumer Companies Listed on the Indonesia Stock Exchange 2018-2020. https://doi.org/10.2991/aebmr.k.220602.046
Silaban, D., & Dewi, R. R. (2023). The Effects of Green Innovation, Eco-Efficiency, Business Strategy, Technology Information Investment, and Profitability on Firm Value. Ilomata International Journal of Tax and Accounting, 4(3), 470–490. https://doi.org/10.52728/ijtc.v4i3.791
Sugiyono. (2013). Metode Penelitian Kuantitatif, Kualitatif, dan R&D. ALFABETA.
Tseng, M.-L., Wang, R., Chiu, A. S. F., Geng, Y., & Lin, Y. H. (2013). Improving performance of green innovation practices under uncertainty. Journal of Cleaner Production, 40, 71–82. https://doi.org/10.1016/j.jclepro.2011.10.009
Wang, Y. Z., & Ahmad, S. (2024). Green process innovation, green product innovation, leverage, and corporate financial performance; evidence from system GMM. Heliyon, 10(4). https://doi.org/10.1016/j.heliyon.2024.e25819
Xie, X., Huo, J., & Zou, H. (2019). Green process innovation, green product innovation, and corporate financial performance: A content analysis method. Journal of Business Research, 101, 697–706. https://doi.org/10.1016/j.jbusres.2019.01.010
Xie, X., & Zhao, J. (2020). Analysis of the Influence of Financial Flexibility on Enterprises. Open Journal of Business and Management, 08(04), 1917–1922. https://doi.org/10.4236/ojbm.2020.84117
Published
2025-06-05
How to Cite
Laura Cahya Putri, Ina Indriana, S.E, M.Si, Ph.D, & Nana Nofianti S.E, M.Si. (2025). The Influence of Green Innovation on Firm Value: The Mediating Role of Financial Flexibility. International Journal of Economics, Business and Innovation Research, 4(04), 199-217. https://doi.org/10.63922/ijebir.v4i04.1880
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