Financing sources, green investment, and environmental performance: Cross-country evidence.

This article investigates the influence of financing sources and financial constraints on green investment, based on a study conducted with a sample of Eastern European SMEs from 2018 to 2020. We constructed a green investment proxy using principal component analysis, revealing two principal pillars: pure green investment and mixed green investment. Employing two-stage least squares regression analysis (2SLS) and instrumental probit (IV Probit), our results demonstrate that internal finance positively impacts green investment. Conversely, we find that leverage and financial constraints negatively correlate with green investment and environmental performance. The findings of this study provide compelling evidence that SMEs operating in the Eastern European region face significant financial constraints, impeding their ability to adopt responsible investments aimed at reducing their considerable environmental footprints. These results hold valuable implications for both managers and policymakers, emphasizing the importance of facilitating increased access to debt and devising green financial incentives to promote environmentally responsible investments among Eastern European SMEs, particularly during periods of conflicts.

Does it pay to go green? The environmental innovation effect on corporate financial performance.

The current global economy demands synergies between ecological responsiveness and business models. To analyse this dynamic, this study investigates the relationship between green innovation and corporate financial performance for German HDAX companies from 2008 to 2019 by constructing an green innovation measure. A two-step GMM system and penalised-spline estimation are used to test the linear relationship between green innovation and financial proxies (return on assets, return on invested capital, and the market-to-book ratio). The results indicate a linear positive effect of green innovation on different financial performance measures. This suggests that green innovation drives resource efficiency and enhances corporate reputation, which, in turn, boosts financial performance.