1 s2.0 S2405844024018504 Main

Heliyon 10 (2024) e25819
Contents lists available at ScienceDirect
Heliyon
journal homepage: www.cell.com/heliyon
Research article
Green process innovation, green product innovation, leverage, and

corporate financial performance; evidence from system GMM
Yan Zhao Wang a, **, Shafiq Ahmad b, *
a
College of Finance, Henan Institute of Economics and Trade, Zhengzhou, 450018 Henan, China
b
Institute of Management Sciences, Bahauddin Zakariya University Multan, Pakistan
A R T I C L E I N F O A B S T R A C T
Keywords: Natural resource usage has produced various environmental challenges. Green process innovation
Green process innovation has been considered a viable option that can help both industry and society. This study in
Corporate financial performance vestigates the impact of green process innovation and green product innovation on corporate
Green product innovation
financial performance. We based our findings on a sample of 280 listed non-financial firms
South Asia
operating in South Asia. Information was gathered from firms’ annual and CSR reports from 2012
GMM approach
to 2022. This study’s data was analyzed using a two-step dynamic panel system GMM, correlation
analysis, multicollinearity diagnostic tests, and descriptive statistics. Corporate financial perfor
mance is measured with ROA, ROE and Tobin’s Q. Overall findings of the study show that green
innovation has a significant positive impact on all measures of financial performance. Investing in
the innovation of green products and green process can assist businesses in avoiding environ
mental concerns and regulatory penalties, while also assisting them in establishing new market
prospects and achieving new levels of success with their green products. In addition, developing
products that are friendly to the environment is tightly connected to expanding green compe
tencies, promoting a company’s green image, and improving the company’s financial perfor
mance. Particularly useful for policymakers in developing countries, the study’s findings can be
used to introduce paradigm-shifting legislation and penalties that speed up business adoption of
green process innovation.
1. Introduction
Rapid economic growth has resulted from the wide development pattern since the Industrial Revolution; nevertheless, this has also
resulted in the over-exploitation of natural resources and severe environmental damage. As resource scarcity and pollution worsen,
protecting the environment and finding viable resource management methods are becoming pressing concerns worldwide [1]. There is
a unique opportunity and a sacred mission bestowed by history to include green development in economic transformation. Green
technology refers to any method, procedure, or item that is designed to cut energy and raw material consumption and environmental
pollution as compared to conventional technology [2]. Because of its crucial function in enhancing environmental quality, it cannot be
replaced [3]. Sustainable development goals can’t be met without a shift toward environmentally benign and resource-conserving
innovations, and this is where green technology comes in Ref. [4]. Enterprise-level green technology innovation is highly
* Corresponding author.
** Corresponding author.
E-mail addresses: 20140100@huel.edu.cn (Y.Z. Wang), shafiqchandia786@gmail.com (S. Ahmad).
https://doi.org/10.1016/j.heliyon.2024.e25819
Received 15 May 2023; Received in revised form 1 February 2024; Accepted 2 February 2024
Available online 12 February 2024
2405-8440/© 2024 The Authors. Published by Elsevier Ltd. This is an open access article under the CC BY-NC-ND license
(http://creativecommons.org/licenses/by-nc-nd/4.0/).
Y.Z. Wang and S. Ahmad Heliyon 10 (2024) e25819
recognized since it has the potential to increase market competitiveness and reduce environmental impacts throughout the production
and consumption processes [5]. Consequently, governments, consumers, and non-governmental groups of all stripes have come to
appreciate the critical nature of green technology innovation in firms, particularly in those that generate a great deal of pollution.
Companies’ green technology innovation covers the whole gamut from brainstorming environmentally friendly products and services
to bringing them to market in a way that supports the values of sustainable development. The importance of green technology is
growing as the economy and society change, as evidenced by the transition from end-of-pipe to process and product greenness.
Green process innovation (G_PROC) and green product innovation (G_PROD) are the two main kinds into which business green
technology may be categorized in terms of their respective environmental impacts [6]. As a rule, cutting down on overall emissions and
intensity is the ultimate result of technological advancements in end treatment. Changing the terminal treatment process or equipment
for the better can help reduce pollution at the end of the industrial process [7]. The production phase is where the majority most of
G_PROC, a preventative approach to environmental management, takes place. Developing ecologically friendly products is an
advanced innovation technique that can curb pollution production. It helps businesses minimize or eliminate their pollution output
and conform to environmental protection regulations, which boosts their public standing [8].
G_PROC can be seen as an ecologically conscious business practice and a valuable tactic for fostering long-term competitive ad
vantages. According to one description, " G_PROC " is “usage or development of production methods that are novel to firms and which
leads in the drop of environmental degradation relative to applicable substitutes" [9]. Production waste can be reduced by G_PROC. It
also addresses end-of-pipe technology employing pollution-control apparatus to ensure conformity with statutory environmental
requirements further [10]. More energy is conserved, and garbage is diverted from landfills because of these innovations [11]. For
these reasons, businesses frequently adopt G_PROC to boost productivity, save money, and create new opportunities in the market
[12]. Businesses, sectors, and academics all agree that G_PROC is crucial.
It is predicted that advances in green technology will reduce our influence on the ecosystem while also facilitating the economic
benefits of a more technologically advanced society [13]. For green technology innovation to be successful, Bu et al. [14] state that two
conditions must be met. First, the innovation must be predicated on novel technological knowledge. In recent years, several manu
facturers have begun to adopt eco-friendly processes and products. Over the past several decades, nations have prioritized economic
and industrial progress, often at the expense of the environment. This expansion has mostly relied on conventional technologies,
contributing to climate change via their excessive energy use and greenhouse gas emissions [15]. According to the Intergovernmental
Panel on Climate Change (IPCC), the rising sea levels and melting glaciers caused by global warming pose a threat to all life on Earth
(IPCC, 2013). It is, therefore, urgent to shift away from energy-inefficient technology driven by fossil fuels and instead invest in clean
and green technologies that save energy and reduce pollution and emissions from manufacturing [16]. Also, green technologies can
help solve the problem of economic growth while reducing emissions of harmful greenhouse gases. Since governments are reluctant to
adopt new technology that could slow down their economic and industrial development, green technologies hold a lot of potential
because they improve energy efficiency and lower emissions [17]. Companies in the developed world are subject to carbon charges for
emissions that exceed a set limit.
Even though developed countries have implemented stringent governmental measures to reduce emissions from their
manufacturing sectors, developing economies have prioritized economic growth [18]. Because of this, the Pollution Haven Hypothesis
(PHH) proposes that businesses will continue to take advantage of these loopholes by relocating their operations to developing
countries to avoid the higher tax rates, stricter audits, and punishments that they would face if they stayed in the developed world [19].
Other emerging nations have announced plans to adopt similar policies in response to criticism and fines. The People’s Republic of
China is one such country, as it has set a limit on carbon emissions and implemented distinct tax rates for items destined for domestic
use and export [20]. The Chinese government takes environmental issues seriously, as evidenced by establishing a specific division
inside the Ministry of Ecology and Environment whose sole responsibility is establishing emission caps and overseeing their effective
implementation [21]. As a result, it is getting harder for companies to move their factories to pollution-free zones, increasing the
pressure on them to either to adopt green technologies or face heavier fines and penalties. Not only are enterprises influenced to
implement green process improvements by regulatory measures, but also by normative pressures. Customers are becoming increas
ingly aware of environmental issues, prompting a need for green technology and the elimination of those that pollute [22]. Businesses
that want to keep up with their customers’ ever-increasing interest in Ref. [23]environmentally friendly technologies will need to
include green production technologies and related equipment in their operations [24]. However, the issue is that green disruptive
technology is difficult to predict due to the so-called “twofold externality" dilemma [25]. The possible positive impact of environ
mentally friendly advancements on a company’s bottom line takes time to materialize [26], whereas on the other hand side, the
transition of green technical innovation into monetary gains is dependent on numerous mechanisms involved and contingencies.
Considering that innovation failure is becoming an increasingly relevant problem, particularly in severely polluting sectors [27], it is
worthwhile to investigate the elements that might hinder organizations’ financial success when green methods are implemented.
Besides other countries, this problem is not explored from the South Asia context therefore, we shall try to resolve it in this research.
Even though developed countries have implemented stringent governmental measures to reduce emissions from their
manufacturing sectors. Emerging economies are also adopting similar measures. South Asia is facing environmental concerns however,
trying to adopt measures to tackle carbon emissions. However, there is no such exploration done in the perspective of manufacturing
firms in South Asia. Therefore, we explore this relationship. (1) To explore the relationships between G_PROC and firms’ financial
performance (CFP). (2) To explore the association between G_PROD and firms’ financial performance. (3) To explore G_PROD and
G_PROC to make better performance of organizations in South Asia.
Furthermore, this study has employed a two-stage system dynamic panel GMM estimation approach and multiple tests to get the
robust results. Green technology has progressed as a direct result of the ongoing growth of both the economy and society. As a result,
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the significance of green technology is growing at an exponential rate. The management of environmentally friendly innovations has
shifted its primary strategic focus to include green products and production methods. One of the fundamental characteristics of
businesses that are taking part in the fight against global warming is the implementation of clean technology in the production of
ecologically friendly products. This has a significant impact on the outcomes of green technological innovation.
2. Literature review
The rapid economic growth that has resulted from the broad development mode since the Industrial Revolution has come at the cost
of severe environmental damage and the depletion of natural resources [28]. Due to the deteriorating resource conditions and severe
environmental degradation, sustainable resource usage and environmental protection have emerged as critical issues on a worldwide
scale [29]. A historic opportunity and a spiritual mission have been bestowed upon us to include the idea of green development in the
practice of economic conversion [6].
2.1. Green process innovation and corporate performance
Green process innovation and firm performance have been studied using the RBV [30]. As the public’s expectation for a clean
environment rises, RBV’s proponents argue that companies can increase their social legitimacy and access previously unavailable
resources. In addition, businesses must implement environmental protection procedures in order to remain in compliance with
environmental protection laws [31]. Therefore, G_PROC is essential for businesses to boost their competitive edge [32]. True G_PROC,
however, necessitates substantial investments from companies in order to adjust their technology and business models [33]. As a
result, we argue that G_PROC will have an impact on companies’ bottom lines, while the extent of that impact will vary depending on
the degree to which each company embraces such innovations.
We argue that firms suffer an initial profit decrease and are at a competitive disadvantage compared to inventive competitors that
are not investing in green processes when they increase the amount of G_PROC from a low to medium level. When companies
implement G_PROC, they must first invest heavily in personnel, time, and money—all of which can add up quickly [4]. Training and
safety costs, management costs, labor costs [34], and research costs [35] are just a few examples. Second, earlier studies [34,36,37]
have demonstrated that innovative enterprises pursuing green aims also assume larger risks than is the case for rivals who do not
engage in green innovation. Uncertainties about the long-term viability and performance of green technologies, as well as probable
constraints on enterprises’ technical capacities, may increase innovation risks because they are innovative and still in the early stages
of development [38]. As a result of the time it takes for any monetary benefits to accrue from their green process improvements, such
businesses typically have a lengthy payback period [39]. Furthermore, companies that have low levels of G_PROC and lack clarity in
environmental efficiency [40] also encounter significant challenges in terms of bearing the costs associated with environmental
protection. This is due to the implementation of more stringent environmental laws and regulations by governments worldwide [41].
Therefore, businesses with moderate adoption of G_PROC may see a decline in earnings and poor financial results.
Although initial G_PROC may have a negative effect on a company’s bottom line, we argue that this has a diminishing effect over
time and can even turn positive once a certain threshold is crossed. It has been shown in the past that innovative green businesses may
reduce the financial impact of regulations and may even increase their bottom line [42]. As a second benefit, increased G_PROC can
reduce operational expenses for businesses by reducing energy consumption and recycling garbage [43] because these two factors are
often the root causes of pollution. Third, enterprises with a high level of G_PROC have lower environmental compliance costs, receive
more government support [44], and have a better green image [15]. Market investors are more likely to reward companies with a good
reputation, and businesses that promote a green image can potentially gain a flood of new clients who are eager to pay a premium for
their products [45]. Therefore, the adverse effects on CFP decrease and the beneficial effects increase as the amount of G_PROC in
creases beyond a certain point.
In conclusion, there is an “inflection point" in the link between G_PROC and firms’ financial success, after which the level of
G_PROC has a positive effect on CFP. As a result, the following theory is put forth:
H1. The green process innovation of a company is connected with its performance.
2.2. Green product innovation and corporate performance
According to Tariq et al. [46], green technology innovation is encompasses two basic strategies: G_PROC and G_PROD. The purpose
of eco-friendly product development is to increase energy effectiveness and reduce waste from production and consumption. To
achieve this goal, the manufacturing procedure makes use of harmless substances and biodegradable components [47]. In order to
develop new eco-friendly products, it is necessary to examine the entire product life cycle from beginning to finish, from production to
distribution to usage to final deployment or reuse and recycling. To be more specific, G_PROD includes making a product last longer or
be easier to recycle, using less raw materials, using raw materials that are more beneficial to the environment, and doing away with
harmful elements. Until then, G_PROC seeks to reduce overall energy use across all stages of manufacturing and recycling [11].
Emissions reduction, water use decrease, resource and energy conservation enhancement, and fossil fuel replacement are all examples
of what are meant by “G_PROC”. Leading businesses that adopt innovative tactics for advancing green technologies stand to gain and
keep several competitive advantages. Both cost-effectiveness and financial gain are among these benefits.
The goal of G_PROD is to meet consumer demand while simultaneously minimizing negative effects on the ecosystem during a
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product’s lifespan [33]. Technology or material advancements are two instances of G_PROD. There has been a growing awareness in
recent years that G_PROD is crucial to achieving growth as well as environmental sustainability. A change in perspective led to this
realization [48].
If a company invests in G_PROD, it may increase its chances of avoiding regulatory penalties and environmental backlash, as well as
open up new sales channels and boost its green goods’ overall success. In addition, the introduction of eco-friendly products is
intrinsically linked to the growth of green competences, the promotion of a firm’s green image, and the strengthening of its FFP. Since
green procedures are crucial to a company’s bottom line and the spread of eco-friendly product development, they’re worth
emphasizing. Elevated concentrations of product innovation yield the greatest competitive advantage when backed by equally high
levels of industrial process innovation. Rehman et al. [49] argues that the “resource-based vision” is reflected in the holistic approach
to studying green innovation process and green product. When a company’s own resources, such as its product and process compe
tences, work together in harmony, it may gain an advantage in the marketplace and improve its efficiency and productivity.
ROA is a standard accounting measure of FFP that is often employed in the green innovation literature [50]. It indicates the results
of specific activities that have been taken in the past and are being taken in the present. Previous research has demonstrated that there
is a favorable correlation between innovative technologies and the ecological performance of an organization.
For Taiwanese manufacturers, Irani et al. [51] examines how green adaptive ability mediates the association between company
environmental efforts and green human resources and the success of G_PROD. Wei et al. [52] assess the links between G_PROD, green
product, and corporate ’s functioning, in addition to the factors that impact the link among green innovation and FFP, using data from
209 registered companies in greatly polluting industrial sectors.
It has been shown, and is still claimed by some researchers, that product innovation and process innovation are inextricably linked
inside businesses [32]. It is our belief that the degree to which a corporation innovates environmentally friendly internal procedures is
correlated with the degree to which it pioneers environmentally friendly outputs. First, G_PROC may encourage the development and
manufacture of greener products while laying the foundation for the employment of sustainable product innovation, as it necessitates
structured enhancements to the entire operational and administrative procedures to enhance the effectiveness of resources. This is
because developing greener operations often necessitates a more methodical approach to enhancing all aspects of running a business.
Thus, we advance the following hypothesis.
H2. Green product innovation is positively related to firm performance.
2.3. Leverage and corporate financial performance
Many prior empirical studies have explored the link between leverage and a company’s performance. Many authors, including Qing
et al. [53] and You et al. [54], indicate positive associations between leverage and firm performance. According to Hu et al. [55], a
company’s performance can be enhanced by taking on debt because the profits generated exceed the average interest expense incurred
on leverage. Since successful businesses communicate signals of high quality by increasing their level of leverage, their results are
consistent with other seminal publications such as [30]. Ma et al. [56] revealed a negative effect of leverage on firm performance,
while other researchers, such as Appolloni et al. [57], find no meaningful association between firm performance and leverage. There is
a negative association between leverage and economic performance due to agency problems, as stated by Fatima et al. [44].
Hypothesis 3. Leverage significantly impacts corporate financial performance.
2.4. Firm size and corporate financial performance
Numerous analyses have established a robust relationship between firm size and profitability. Extending the scope of its operations
has always been a top priority for the business. Theoretical support for the positive association between size and performance is
provided by scale economies. Though many companies are expanding in size, their annual performance is not improving. Ahmad et al.
[58] analyzed several sources and concluded that business managers’ pursuit of self-interest was to blame for the negative association
between company size and performance. The problem of management utility maximization replacing the motive to maximize earnings
for firms was also brought to light by Hu et al. [59]. Khattak et al. [60] demonstrated that larger organizations have a greater
requirement for coordination, which makes the task of management harder, which in turn leads to inefficiency and inferior returns.
The relationship between business size and success has been the subject of numerous scholarly investigations. These studies can
have a major influence on a business’s bottom line, but researchers usually ignore the implications of gender and race. Most studies
that looked at the relationship between firm size and profitability employed a linear regression model [61] using age and size as
independent variables. In theoretical economics, the correlation between company size and success is difficult to pin down One line of
thought maintains that large businesses can maximize their resources by standardizing their processes and making strategic use of their
existing infrastructure. Considering these characteristics, bigger companies should do better than their smaller competitors. However,
an opposing view holds that market power increases with company growth and that this in turn leads to increased inefficiencies.
Hypothesis 4. Firm Size significantly impacts corporate financial performance.
2.5. Firm age and corporate financial performance
Several researchers, including [31,57], have studied the impact of a company’s age on its chances of survival, but their results have
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been inconclusive. The term “liability of newness" was coined by the author in earlier work to describe the heightened risk of failure
that comes with a firm’s relative age. He used the phrase “social capital” to highlight the importance of nascent enterprises encour
aging communication and collaboration among employees and with other organizations to offset the high “social costs” of learning
new skills. Newness liability, as described by Azam et al. [62], can substantially hamper a company’s growth rates, perhaps leading to
the company’s extinction.
Hypothesis 5. Firm Age significantly impacts corporate financial performance.
2.6. Growth and corporate financial performance
To put it simply, the assets of a company are the funds the firm has and estimates that will be useful to the company in the future.
Cash on hand and accounts receivable are the most typical examples of monetary assets. Stock, land, buildings, and machinery are
some examples of intangibles that cannot be converted into cash. There are also intangible assets that cannot be physically touched,
such as patents, trademarks, and copyrights. Companies can only function as intended if their owners have legal title to the company’s
assets. All the parts of an organization’s assets, liabilities, and equity must work together for the business to succeed. It is common to
practice measuring the success of an investment by the rate of return on its shares. But contrary to the efficient market idea, studies
have demonstrated that markets are reluctant to absorb publicly available information. Sales and profit growth rates are also crucial
yardsticks of success. Zhu et al. [63] studied 15 European countries to determine how loan growth rates relate to a bank’s business
strategy, and he found that banks with higher loan growth rates are more likely to engage in risky lending practices. Furthermore, they
found that an excessive increase in aggregate credit makes banks more vulnerable to risk. To some extent, this phenomenon may affect
even banks whose loan growth rates are far lower than their competitors.
Hypothesis 6. Growth significantly impacts corporate financial performance.
3. Research gap
From the above studies, many previous studies have discussed the emerging topic of corporate performance, but the concept of
G_PROC and G_PROD has been ignored. Previous studies have used traditional analysis methods, but in this study, an advanced
analysis method has been employed to get robust results. In previous studies, variables like the age of the firm, leverage of the firm, size
of the firm and the growth ratio of the firm have yet to be addressed. In this study it has been focused.
3.1. Research design
The research establishment relies on research designs to aid in the delineation of study boundaries based on the significance of
research domains, study types, and study units. It is indeed a strategy for gathering information and resolving issues raised in
exploratory queries [10]. In the preliminary stages of the study, analysts dug into the literature and previous experimental studies to
find the groundwork for our understanding of the wonder in question. The next stage involves acknowledging developments, defining
hypotheses, and identifying demands; these factors all helped to strengthen the exploration issue and motivate an evaluation of an
integrated research model [64]. As a result of the limitations inherent in illustrative research, scientists integrated it with a rational
inquiry to better define the link between the components or hypotheses behind the systematical framework. This research will involve
determining which factors play a role and which ones do not. For this reason, we have used on using secondary data for analysis.
Methods like this are efficient and cost-effective for properly examining facts following their original context.
3.3. Data
We analyze the impact of G_PROC and G_PROD on corporate financial performance by extracting data from annual reports of 280
Table 1
Variables description.
Variables Abbr. Definition References
Dependent Variables: Corporate Financial Performance

Return on Asset ROA Net income/Total assets Ikram et al. [65]
Return on Equity ROE Net income/Shareholders Equity Kartiko et al. [66]
Tobin’s Q TQ Market to book value ratio
Independent Variables: Corporate Philanthropy
Green Process Innovation G_PROC Measured with the content analysis approach given by Xie et al. [67] Xie et al. [67]
Green Product Innovation G_PROD Measured with the content analysis approach given by Xie et al. [67] Xie et al. [67]
Control Variables
Leverage LEV Total Debt/Total assets Qing et al. [68]
Firm Size FS Natural log of total assets Kartiko et al. [66]
Firm Age FA Natural log of firm operating years Kartiko et al. [66]
Growth GR Annual change in total assets Kartiko et al. [66]
5
listed non-financial firms of Stock Exchanges from 2012 to 2022.
3.4. Statistics
Corporate financial performance is our dependent variable. While G_PROC and G_PROD are the independent variables of interest
used in empirical models. Control variables used in the study are leverage, firm age, firm size, and growth. All these variables are
described in Table 1.
3.4.1. Dependent variable: financial performance

It has been shown that Return on Assets (ROA) is a common accounting indicator of financial success used in the implementation of
sustainable field [67]. ROA is a more dependable indicator for measuring financial results than revenue growth or return on invest
ment due to the management influence of short-term actions and the uncertainty surrounding the external world in emerging countries
[69]. Therefore, we utilized ROA as a measure of the FFP as it is a stable and reliable metric. Previous studies have also shown that a
company’s green initiatives can have an impact on its stock price. The selection of ROE as the dependent variable is in keeping with
[2]. Net income divided by stockholder equity yields ROE.
Tobin’s Q (TQ) value will be used to evaluate the company’s performance. Previous inquiries only used accounting indications,
which are highly susceptible to manipulation. Tobin’s Q value looks ahead, incorporates both financial and market metrics, and is
resistant to manipulation by upper management. According to Fu et al. [70], Tobin’s Q is positively correlated with firm success
because it measures a company’s capacity for investment and expansion.
3.4.2. Independent variable: green process innovation

Generally speaking, there are two types of G_PROC: cleaner technologies and edge technology. As indicated by Kraus et al. [71],
three indices were used to evaluate clean technology. Each item was given a score between 0 and 2 based on the absence or presence of
relevant information in the company’s CSR Reports using the content analysis technique: 0 if no relevant information was found; 1 if
information was found but lacked implementation details (such as specific instructions, an execution plan, or statistical terms, indi
cating that the company really was undertaking a pertaining form of innovation); and 2 if information was found but lacked both
relevant information and implementation details. By averaging the prices of low - carbon technologies and pipe technologies end, the
value of eco-friendly innovation process was calculated.
3.4.3. Green product innovation

We used three indices to quantify G_PROD following the work of Wei et al. [52]. Altering product designs to cut down on the use of
substances that contribute to pollution or human toxicity is one example of the kind of things that these standards look for. Modifying
product designs to reduce energy consumption in use and creating more eco-friendly packaging for both new and existing products.
3.4.4. Control variables

Below are some supplementary variables that can be used as controls. Therefore, Firm size is regarded as a crucial factor in
explaining corporate performance, particularly for larger firms that need more resources (such as time, money, and knowledge) to keep
up with client expectations and their expansion. FS is determined annually by taking the natural logarithm of all assets. Companies that
have been around for longer tend to be larger, more diverse, and more profitable than their younger counterparts, therefore we believe
that these factors will have a positive impact on the stock price [51]. Consequently, we consider a company’s age by computing the
natural logarithm of its number of years in business [72]. Increasing a company’s assets is associated with increased profits, as evi
denced by studies by Hu et al. [38]. The ability to turn a profit is inextricably linked to the degree of leverage (LEV) employed by a
business. Companies with little capital are more likely to participate in socially-related activities, according to Li et al. [6]. As a result,
we believe that degree of leverage (LEV), which is find by dividing a company’s total debt by its total assets, will have a negative
impact on financial outcomes.
3.4.4.1. Mathematical equation or econometric model. Mathematical model has been presented in Eq. (1).
( ( (
CFP)i,t = α + β1 G PROC)t + β2 G PROD)t + β3 (LEV)i.t + β4 (FS)i.t + β5 (FA)i.t + β6 (GR)i.t + μi,t 1
where CFP denotes corporate financial performance, which is our dependent variable. G_PROC stands for green process innovation and
G_PROD stands for green product innovation are independent variables in our model. Leverage (LEV), Firm size (FS), Firm age (FA) and
Growth (GR) are firm-level control variables and μ is an error term.
( (
ROA)i,t = α + β1 G PROC)i.t + β2 (LEV)i.t + β3 (FS)i.t + β4 (FA)i.t + β5 (GR)i.t + μi,t 2
( (
ROA)i,t = α + β1 G PROD)i.t + β2 (LEV)i.t + β3 (FS)i.t + β4 (FA)i.t + β5 (GR)i.t + μi,t 3
( ( (
ROA)i,t = α + β1 G PROC)t + β2 G PROD)i.t + β3 (LEV)i.t + β4 (FS)i.t + β5 (FA)i.t + β6 (GR)i.t + μi,t 4
Table 5 is estimated using Eqs. (2) and (3) Model 1 and Model 2 evaluate the influence of G_PROC and G_PROD estimated with Eqs.
(2) and (3) respectively. Model 3 included G_PROD and G_PROD simultaneously to examine their role in corporate financial
6
performance as presented in Eq. (4). ROA is the return on assets. While LEV, FS, FA and GR are firm-level control variables denoting
Leverage, Firm size, Firm age and Growth.
( (
ROE)i,t = α + β1 G PROC)i.t + β2 (LEV)i.t + β3 (FS)i.t + β4 (FA)i.t + β5 (GR)i.t + μi,t 5
( (
ROE)i,t = α + β1 G PROD)i.t + β2 (LEV)i.t + β3 (FS)i.t + β4 (FA)i.t + β5 (GR)i.t + μi,t 6
( ( (
ROE)i,t = α + β1 G PROC)t + β2 G PROD)i.t + β3 (LEV)i.t + β4 (FS)i.t + β5 (FA)i.t + β6 (GR)i.t + μi,t 7
Table 6 is estimated using Eqs. (5)–(7). Model 1 and Model 2 evaluate the influence of G_PROC and G_PROD estimated with Eqs. (5)
and (6) respectively. Model 3 included G_PROC and G_PROD simultaneously to examine their role in corporate CFP. ROE is the return
on Equity. While LEV, FS, FA and GR are firm-level control variables denoting Leverage, Firm size, Firm age and Growth.
( (
TQ)i,t = α + β1 G PROC)i.t + β2 (LEV)i.t + β3 (FS)i.t + β4 (FA)i.t + β5 (GR)i.t + μi,t . 8
( (
TQ)i,t = α + β1 G PROD)i.t + β2 (LEV)i.t + β3 (FS)i.t + β4 (FA)i.t + β5 (GR)i.t + μi,t 9
( ( (
TQ)i,t = α + β1 G PROC)t + β2 G PROD)i.t + β3 (LEV)i.t + β4 (FS)i.t + β5 (FA)i.t + β6 (GR)i.t + μi,t … 10
Table 7 is estimated using Eqs. (8)–(10). Model 1 and Model 2 evaluate the influence of G_PROC and G_PROD estimated with Eqs.
(8) and (9) respectively. Model 3 included G_PROC and G_PROD simultaneously to examine their role in CFP. TQ is Tobin’s Q. While
LEV, FS, FA and GR are firm-level control variables denoting Leverage, Firm size, Firm age and Growth.
Furthermore, the analysis consisted of the following steps.
• In the first step, descriptive statistics of the variables were taken.

• In the second step, a multicollinearity test was employed.
• In the third step, a correlation matrix was found.
• Further steps consisted of a two-step system dynamic panel estimation with a ROA, ROE and TQ.
The flow of analysis can be seen in Fig. 1.
3.5. Techniques
Panel data analysis using dynamic structures offers various advantages over static modeling, especially in addressing heterogeneity
and endogeneity concerns. This is achieved by the use of instrumental and delayed variables. However, when employing generalized
method of moments (GMM) estimation, dynamic panel models encounter several issues such as estimator instability, serial correlation,
and weak instruments. These problems often result in overidentification in these models.
Roodman et al. [73] improved upon the restrictions stated above by establishing an Estimator feature in the Stata package. This
feature is based on the Arellano and Bover et al. [74] system of GMM with onward orthogonal divergences. It allows for separate
handling of endogeneity in independent and dependent variables, as well as the inclusion of lags in both levels and differences. This
Estimator provides the option to do an analysis in either one or two phases, reliant on the type of weight matrix used: heteroscedastic or
homoscedastic. This paper utilizes the two-step estimation method projected by Roodman et al. [73] because it is more efficient for
panel data collected over a short time span. This method encompasses instruments in levels to minimize information loss. Additionally,
the usage of a heteroscedastic matrix in this case, as indicated by Diéguez-Soto et al. [75], further enhances efficiency.
In order to do this analysis using Stata, it is necessary to classify variables in the model as either endogenous, weakly exogenous, or
exogenous. In addition, Roodman et al. [73] suggested using Sargan and Hansen tests to examine the existence of surplus instruments
Fig. 1. Analysis pattern.
7
as a solution to address the problem of overidentification. Nevertheless, when examining overidentification in a two-step system for
GMM, the Hansen test is the preferred method [75].
This study employed a combination of tactics, utilizing a systematic approach to construct models in order to minimize the issue of
overidentification. This was achieved by limiting the inclusion of lagged values of the explained variable as regressors in the model. It
restricts the utilization of lags in the generation of instruments for endogenous variables and exclusively employs in-level equations.
Following the statistical measuring, the two tests for over identification were conducted, along with the Arellano and Bond test for
serial autocorrelation.
Roodman et al. [73] emphasizes that when estimating dynamic models using panel data, it is preferable for the number of periods,
T, to be no more than 10. As a result, the analyses conducted excluded observations from the initial four-year period, 2003–2006, in
order to restrict the data timeframe to only ten years, 2007–2016. This option was also attractive because it reduced the occurrence of
automatically excluded placeholder time variables resulting from collinearity in the later analyses. Hu et al. [38] propose that if time
dummies or other variables are excluded due to collinearity, the resulting p-values and degrees of freedom for the overidentification
tests are inaccurate. The following actions were made for each of the dependent variables: ROA, and ROE.
A rudimentary two-step dynamic panel data regression analysis was conducted to examine the relationship between the dependent
variable and the regressors. The regressors included the first lagged dependent variable and the variables representing green inno
vation (G_PROD, and G_PROS). The controls encompassed the industry’s nature (polluting or environmentally friendly), temporal
factors (dummy variables for different years), the scale of the business, its age, the level of export activity, and the depth of its research
and development efforts. In this rudimentary two-stage model, the initial delayed dependent variable was regarded as endogenous,
while factors such as firm size, export intensity, firm age, and research and development intensity were treated as predefined variables.
The industry type and the variables of organizational innovation (G_PROD, and G_PROS) were considered as exogenous. Therefore, the
initial lagged dependent variable, along with the business’s size, age, exportation level, and R&D intensity, served as the internal
instruments (GMM instruments). On the other hand, the type of industry and the organizational innovation variables G_PROD, and
G_PROS were considered as the external instruments (IV).
When adopting GMM, instruments were created for lagged variables ranging from one to three, with the possibility of combining
them to reduce the number of instruments. Additionally, the equation level is incorporated in the instrumental variable (IV) structure.
The estimates were adjusted using the robust technique to ensure that the estimators remain consistent in the presence of autocor
relation and heteroscedasticity. Additionally, the orthogonal method was employed, necessitating the alteration of forward orthogonal
divergences instead of using first differences. Subsequently, after estimating the fundamental model, tests were conducted to detect
serial autocorrelation using the Arellano and Bond approach for delays 1 to 3. If the autoregressive (AR) coefficient of lag 1 was
statistically significant at a significance level of 5%, and the AR tests for higher lags were not statistically significant, then it was
deemed feasible to continue with the basic model. Alternatively, this model underwent re-estimation by including the lagged
dependent variable 2 as a regressor. Subsequently, the Arellano and Bond test was repeated using the same criteria to examine the
presence of increased serial autocorrelation prior to proceeding with further analyses. The primary aim at this step was to address the
issue of serial autocorrelation as a priority, prior to proceeding with the examination of overidentification.
After resolving the issue of serial autocorrelation, the presence of overidentification was assessed using the Hansen test, which is
particularly appropriate for two-step GMM estimations. If the test yielded a statistically significant result at the 5% significance level, it
indicates that there was an issue of overidentification. In this scenario, the most recent estimated model was recalculated by incor
porating an additional lagged dependent variable as an instrument in the GMM system. Subsequently, a retest for overidentification
was conducted. Diéguez-Soto et al. [75] propose that the p-value of the Hansen test should fall within the range of 0.05–0.8, while
Roodman et al. [73] offers an ideal value between 0.1 and 0.25. Within this paper, the model was considered to be free from any issues
of overidentification as long as one of these two measures was satisfied.
4. Results and discussion
The impact of exogenous variables on the dependent variable is the primary focus of this section. A correlation matrix, descriptive
analysis, and regression analysis using the Generalized Method of Moments are all included in Table 2.
Table 2 displays the study’s mean, median, maximum, and lowest values, standard deviation for each variable, and total number of
observations. The values are for an imbalanced panel covering the years 2012–2022. Research uses Return on Assets (ROA), Return on
Equity (ROE), and Total Quality (TQ) to evaluate CFP. There is no clear outlier in the data, since the average prices of business
performance of listed manufacturing companies in South Asia follow the same trend as the figures of performance, with smaller
variances in both. Two types of green innovation were used as indicators in the study: green processes and green products. The average
value of G_PROC shows that 17% of non-financial firms in this South Asia are involved in G_PROC. Further, the mean value of G_PROD
suggests that about half of the sample firms are involved in G_PROD as an engagement in environmental initiatives to improve their
performance. Control variables in the present study include Leverage, Firm Size, Firm Age and Growth. All these control variables
show lesser variations in the values suggesting that there is no outlier in the data and data follows a normal distribution.
To confirm multicollinearity in the study in Table 3, we describe the Variance Inflation Factor (VIF). We can guarantee there is no
multicollinearity issue in this investigation because the values of VIF are not greater than 5.
Table 4 displays the estimated correlation matrix of all study explanatory factors using data from banks in Asian Emerging
Economies. To verify whether or not multicollinearity exists amongst explanatory factors, a correlation matrix analysis is performed.
G_PROD and Return on Assets have the highest correlation at 0.476, while Firm Size and Leverage have the lowest at 0.001. Therefore,
there is no problem with multicollinearity, as shown by the results of the correlation matrix, which indicate that there is no strong
8
correlation between the explanatory variables.
4.1. Regression analysis
Table 5 is estimated with ROA as a CFP indicator. Our results imply that the more firms are engaged in green initiatives, their
reputation increases which may attract further potential investments ultimately improving CFP. Investing in G_PROD can help
companies avoid ecological concerns and regulatory penalties, while also assisting them in establishing new market prospects and
achieving new levels of success with their green products. This is all thanks to the benefits that businesses receive from the investment.
In addition, the creation of environmentally friendly products is closely linked to the growth of green competencies, the improvement
of a company’s green image, and the enhancement of the company’s financial success. The results also support stakeholder theory
which states that the success of an organization is contingent on how well the organization manages its relationships with key groups of
stakeholders as well as the surrounding environment that have the potential to impact the achievement of the firm’s goals. Empirically,
our results are similar to those of [76,77] who also report identical findings from the Chinese context. Further, the results of model 3
also reveal a significant positive impact of G_PROC and G_PROD on CFP. However, firms in South Asia are more involved in G_PROD
rather than G_PROC as shown in our findings that ultimately improve corporate performance. The findings are consistent with those of
[7,78]. Among control variables, leverage reveals a significant negative impact on CFP. While firm size and growth indicate a positive
significant impact on CFP in Asian emerging economies. However, firm age is insignificantly related to CFP in all four models. These
results are consistent with the earlier literature [8].
The ROE is used as a CFP metric, and the results are estimated in Table 6. The outcomes of the green innovation measured with both
measures of G_PROC as well as G_PROD reveal a positive relationship with CFP measured with the return on equity (ROE) of the
corporation. These findings suggest that the greater a company’s involvement in environmentally friendly practices, the better its
reputation, and hence its ability to attract new investors and boost its performance. Investing in G_PROD can help businesses avoid
environmental concerns and regulatory penalties, while also assisting them in establishing new market prospects and achieving new
levels of success with their green products. This is all thanks to the benefits that businesses receive from the investment. In addition, the
creation of environmentally friendly products is closely linked to the growth of green competencies, the improvement of a company’s
green image, and the enhancement of the company’s financial success. Stakeholder theory, which holds that an organization’s per
formance depends on the management of its connections with important groups of stakeholders and the surrounding environment that
might impact the firm’s achievement of its goals, is also supported by the findings. Our empirical findings are consistent with those of
[79], who present the same conclusions in the Chinese setting. The results of model 3 also show that G_PROC and G_PROD have a
favorable effect on the CFP. Our research shows that green innovation helps businesses in South Asia, but that enterprises focus on
G_PROD rather than G_PROC. The results agree with those found by Ref. [80]. Leverage stands out as a key control variable that has a
negative effect on the CFP. There is a positive and significant association between business size and growth and the CFP in developing
Asian countries. However, firm age is only significantly related to firm performance in model 2 and model 3. These results agree with
the existing literature [15].
Estimates for Table 7 were derived using TQ as the CFP indicator. The first model is estimated using G_PROC. The second model,
which evaluates G_PROD, is followed by the third model, which evaluates the role of G_PROC as well as G_PROD on firm performance.
The outputs of the green innovation, when measured with both measures of G_PROC as well as measures of G_PROD, demonstrate a
positive association with the CFP of the corporation, which is measured with the return on equity (ROE) of the corporation. According
to these findings, a company’s reputation and, as a consequence, its capacity to entice new investors and improve its overall per
formance are positively correlated with the extent to which it participates in environmentally responsible practices. Investing in the
innovation of green products can assist businesses in avoiding environmental concerns and regulatory penalties, while also assisting
them in establishing new market prospects and achieving new levels of success with their green products. This can be accomplished
through the investment of capital. All of this is possible because of the numerous advantages that the investment provides to the
companies [34]. In addition, the development of products that are friendly to the environment is tightly connected to the expansion of
green competencies, the promotion of a company’s green image, and the improvement of the CFP. The findings also provide support
for the stakeholder theory, which asserts that the performance of an organization is dependent on the management of the organiza
tion’s connections with significant groups of stakeholders and the surrounding environment, both of which may have an impact on the
success of the company in achieving its goals. Our empirical findings are congruent with those of [42,81], who provide the same
Table 2
Descriptive statistics.
Variables Mean Median Maximum Minimum Std. Dev. Obs.
ROA 0.039 0.032 1.024 − 1.261 0.1724 1280

ROE 0.144 0.135 2.554 − 2.972 0.1099 1280
TQ 1.366 0.963 4.140 0.139 1.1095 1280
G_PROC 0.1737 0.1398 0.5321 0.0496 0.1988 1280
G_PROD 0.4629 0.4318 0.6204 0.1304 0.0750 1280
LEV 0.1012 0.0907 0.7376 − 0.113 0.0931 1280
FS 14.303 13.934 20.579 9.2091 0.1532 1280
FA 6.5679 6.576 12.792 3.165 0.1701 1280
GR 0.1636 0.1235 3.8663 − 0.372 0.2427 1000
9
Table 3
Test of multicollinearity.
Variable G_PROC G_PROD LEV FS FA GR
VIF 1.11 1.101 1.09 1.08 1.04 1.03

1/VIF 0.901 0.908 0.914 0.93 0.957 0.972
Note: VIF = Variance Inflation Factor.
Table 4
Correlation matrix.
Variables ROA ROE TQ G_PROC G_PROD LEV FS FA GR
ROA 1
ROE 0.176 1
TQ 0.141 0.122 1
G_PROC 0.021 0.009 0.128 1
G_PROD 0.476 0.159 0.031 0.051 1
LEV − 0.216 − 0.142 − 0.209 − 0.046 − 0.044 1
FS 0.005 0.017 0.002 0.005 0.004 0.001 1
FA 0.013 0.035 0.077 0.019 0.014 0.013 0.018 1
GR 0.021 0.191 0.292 0.013 0.002 − 0.012 0.023 0.219 1
Table 5
Two-step system dynamic panel estimation with ROA.
Model 1 Model 2 Model 3
Variables Coef. t-Stat Coef. t-Stat Coef. t-Stat
L1 0.175*** (9.340) 0.155*** (10.440) 0.135*** (8.340)

L2 0.076*** (7.740) 0.092*** (9.770) 0.084*** (9.760)
G_PROC 0.007*** (4.202) – – 0.584*** (6.760)
G_PROD – – 0.053*** (3.080) 1.454** (2.26)
LEV − 0.051*** (-9.90) − 0.050*** (-9.20) − 0.052*** (-9.60)
FS 0.046*** (5.30) 0.002*** (5.80) 0.005*** (5.310)
FA 0.001 (0.50) 0.001 (0.40) 0.001 (0.550)
GR 0.005*** (2.86) 0.005** (2.49) 0.005** (2.74)
C 0.278*** (5.000) 0.273*** (4.050) 0.274*** (6.040)
Note: Keep in mind that L1. Refers to the first lag of the dependent variable, and L2. Refers to the second lag. ***, ** and * show significance levels at
1%, 5% and 10%.
Table 6
Two-step system dynamic panel estimation with ROE.
L1 0.147*** (4.35) 0.149* (1.73) 0.101 (0.99)

L2 − 0.121*** (-4.72) − 0.341*** (-4.02) − 0.359*** (-3.68)
G_PROC 0.063*** (4.241) – – 0.482*** (4.06)
G_PROD – – 0.066*** (3.936) 0.563*** (3.54)
LEV − 0.139** (-1.89) − 0.793*** (-3.09) − 0.396*** (-2.74)
FS 0.301** (2.43) 0.189** (1.99) 0.628** (2.03)
FA 0.002 (0.99) 0.005* (1.86) 0.044* (1.68)
GR 0.795*** (4.38) 2.382** (2.15) 1.638** (2.38)
C 2.55*** (3.06) 1.540** (2.12) 1.547** (2.29)
1%, 5% and 10%.
conclusions in the context of the Chinese environment respectively. The findings of model 3 indicate, in addition, that G_PROD as well
as G_PROC have a positive impact on the CFP. According to the findings of our research, green innovation is beneficial to businesses in
South Asia; nevertheless, most companies in the country concentrate on G_PROD rather than G_PROC. The findings are consistent with
what was discovered by Refs. [36,82]. One important control variable that stands out as having a detrimental impact on the overall
CFP is leverage. There is a correlation that can be considered both favorable and significant between the size and growth of a com
pany’s operations and the CFP in developing Asian nations. On the other hand, the age of the firm is only strongly connected to CFP in
models 2 and 3. These findings are consistent with the research that has been done previously [4].
10
Table 7
Two-step system dynamic panel estimation with TQ.
L1 0.132*** (3.35) 0.139* (2.83) 0.113** (1.98)

L2 0.146*** (3.29) 0.431*** (3.18) 0.557*** (3.08)
G_PROC 0.105*** (3.41) – – 0.189*** (3.06)
G_PROD – – 0.127*** (3.36) 0.647*** (2.93)
LEV − 0.119** (-2.90) − 0.110** (-1.98) − 0.870** (-2.09)
FS 0.117*** (7.47) 0.159** (2.14) 0.234** (2.34)
FA 0.039** (1.99) 0.104* (1.74) 0.173** (1.98)
GR 0.945*** (3.38) 0.806*** (2.72) 2.478** (2.23)
C 2.653*** (4.16) 1.454** (2.26) 1.386** (2.34)
1%, 5% and 10%.
4.2. Major findings and discussion
The results of green innovation, measured with both measures of G_PROC and G_PROD, reveal a positive relationship with the
return on equity (ROE), ROA and TQ of the corporations. According to these findings, a company’s reputation and, as a consequence,
its capacity to entice new investors and improve its overall performance are positively correlated with the extent to which it partic
ipates in environmentally responsible practices. Investing in the innovation of green products can assist businesses in avoiding
environmental concerns and regulatory penalties, while also assisting them in establishing new market prospects and achieving new
levels of success with their green products. This can be accomplished through the investment of capital. All of this is possible because of
the numerous advantages that the investment provides to the companies. In addition, the development of products that are friendly to
the environment is tightly connected to the expansion of green competencies, the promotion of a company’s green image, and the
improvement of the CFP. The findings also provide support for the stakeholder theory, which asserts that the performance of an or
ganization is dependent on the management of the organization’s connections with significant groups of stakeholders and the sur
rounding environment, both of which may have an impact on the success of the company in achieving its goals. Our empirical findings
are congruent with those of [3,83], who provide the same conclusions in the context of the Chinese environment respectively. The
findings of model 3 indicate, in addition, that G_PROD as well as G_PROC have a positive impact on the CFP. According to the findings
of our research, green innovation is beneficial to businesses in South Asia; nevertheless, most companies in the country concentrate on
G_PROD rather than G_PROC. The findings are the results of green innovation, measured with both measures of G_PROC and G_PROD,
reveal a positive relationship with the return on equity (ROE), ROA and TQ of the corporations. According to these findings, a
company’s reputation and, as a consequence, its capacity to entice new investors and improve its overall performance are positively
correlated with the extent to which it participates in environmentally responsible practices. Investing in the innovation of green
products can assist businesses in avoiding environmental concerns and regulatory penalties, while also assisting them in establishing
new market prospects and achieving new levels of success with their green products. This can be accomplished through the investment
of capital. All of this is possible because of the numerous advantages that the investment provides to the companies. In addition, the
development of products that are friendly to the environment is tightly connected to the expansion of green competencies, the pro
motion of a company’s green image, and the improvement of the CFP. The findings also provide support for the stakeholder theory,
which asserts that the performance of an organization is dependent on the management of the organization’s connections with sig
nificant groups of stakeholders and the surrounding environment, both of which may have an impact on the success of the company in
achieving its goals. Our empirical findings are congruent with those of [4,84], who provide the same conclusions in the context of the
Chinese environment respectively. The findings of model 3 indicate, in addition, that G_PROD as well as G_PROC have a positive
impact on the CFP. According to the findings of our research, green innovation is beneficial to businesses in South Asia; nevertheless,
most companies in the country concentrate on G_PROD rather than G_PROC. The findings are consistent with what was discovered by
Refs. [5,72]. One important control variable that stands out as having a detrimental impact on the overall CFP is leverage. There is a
correlation that can be considered both favorable and significant between the size and growth of a company’s operations and the CFP
in developing Asian nations. On the other hand, the age of the firm is only strongly connected to the CFP in models 2 and 3. These
findings are consistent with the research that has been done previously [38,76].
Furthermore, our findings align with previous research and indicate that when a company combines its internal and external
resources with all supply chain associates and investors, it is more likely to have enhanced opportunities for innovation [12,85].
Moreover, our research indicates that the implementation of environmentally-friendly managerial innovations is directly correlated
with CFP. This implies that when management prioritizes and encourages the adoption of these innovations, it has a favorable effect on
overall business performance. The outcome aligns with the findings of previous investigations [44,86]. On the other hand, there is a
strong negative correlation between G_PROC and the CFP. This implies that the swift alteration in procedures caused by the influence
of environmental organizations, regulatory agencies, and government pressure leads to elevated expenses for companies, resulting in
reduced earnings and diminished performance. This outcome is in direct opposition to the conclusions drawn from previous research
conducted by Refs. [61,86,87].
11
5. Conclusion and policy implications
The non-financial sector plays a significant part in the expansion of economies that are still in their nascent stages. There is a need
for in-depth research on the CFP of this industry in terms of green innovation and environmentally responsible initiatives. The primary
objective of the research was to analyze the effect that G_PROC and G_PROD have on the CFP of publicly traded non-financial firms in
South Asia. Measures of a company’s financial success include return on assets (ROA), return on equity (ROE), and Tobin’s Q. An
additional objective of the research is to conduct a comparative analysis of the data utilizing all available measures of the CFP. This
section provides a synopsis of the research goals and findings of the study, as well as an overall review of the non-financial sector of
South Asia. The chapter continues with a discussion of the practical consequences of the research findings, followed by a discussion of
the recommendations that are based on the results of the study. In the conclusion, it discusses the limitations of the study as well as
some future paths for additional research.
Generally, results with ROA, ROE and TQ show that green innovative initiatives improve the performance of non-financial firms in
South Asia. Investing in the innovation of green products can assist businesses in avoiding environmental concerns and regulatory
penalties, while also assisting them in establishing new market prospects and achieving new levels of success with their green products.
This can be accomplished through the investment of capital. All of this is possible because of the numerous advantages that the in
vestment provides to the companies. In addition, the development of products that are friendly to the environment is tightly connected
to the expansion of green competencies, the promotion of a company’s green image, and the improvement of the CFP.
5.1. Recommendations
Numerous managerial lessons can be gleaned from this research. To begin, in recent years, businesses have been under increasing
pressure to “go green" and reduce their negative impact on the environment. Since there are two distinct types of green technology
innovation, businesses should exploit both to their advantage. Furthermore, when resources are limited, businesses should emphasize
G_PROC to encourage G_PROD.
Second, companies should priorities green branding since it increases customers’ propensity to pay premium prices for eco-friendly
goods, which in turn boosts the company’s market share and bottom line. However, a significant obstacle here is for businesses to
integrate their environmental vision into their overall corporate objectives, rather than focusing solely on green brand promotion.
Additionally, businesses can improve their green reputation by letting customers know about the steps they have taken to protect the
environment, such as recycling, conserving water and energy, avoiding throwaway goods, and decreasing emissions into the air, water,
and soil.
It is important to ensure that green subsidies are being put to good use, and monitoring the companies that get them can help with
this. Furthermore, government officials should listen to practitioners to better understand the challenges that enterprises confront
while implementing green initiatives, rather than designing rules drawn from a particular ideology.
5.2. Practical implications
The results of this study have important implications for researchers, managers, regulators, and policymakers. Managers can use
the findings of the study to determine if green innovation is a good fit for their organization. The study’s findings suggest best practices
for G_PROC and G_PROD that yield positive results for CFP. Sustainable development targets are a major motivator for the imple
mentation of G_PROC due to their focus on reducing harmful emissions and energy consumption. Meanwhile, the practitioner can gain
a comprehensive familiarity with the concerns, constraints, and potential rewards of G_PROC, allowing for more intelligent and well-
informed decision-making. Particularly useful for policymakers in developing countries, the study’s findings can be used to introduce
paradigm-shifting legislation and penalties that speed up business adoption of G_PROC.
5.3. Limitations and future directions
First, the scope of this research can be broadened by including both listed and unlisted non-financial institutions from South Asia.
Second, additional research might be conducted by incorporating market-based metrics of the CFP of banks. The third way this
research might be expanded is by including data from both developed and emerging economies in its analysis. Finally, studies like
these need not include developing nations at all.
CRediT authorship contribution statement
Yan Zhao Wang: Methodology, Investigation, Funding acquisition, Formal analysis, Data curation, Conceptualization. Shafiq
Ahmad: Writing – review & editing, Writing – original draft, Visualization, Validation, Supervision, Software, Resources, Project
administration.
Declaration of competing interest
The authors declare that they have no known competing financial interests or personal relationships that could have appeared to
influence the work reported in this paper.
12
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Contents lists available at ScienceDirect

Green process innovation, green product innovation, leverage, and

2.1. Green process innovation and corporate performance

2.2. Green product innovation and corporate performance

2.3. Leverage and corporate financial performance

2.4. Firm size and corporate financial performance

2.5. Firm age and corporate financial performance

2.6. Growth and corporate financial performance

3.1. Research design

Dependent Variables: Corporate Financial Performance

listed non-financial firms of Stock Exchanges from 2012 to 2022.

3.4.1. Dependent variable: financial performance

3.4.2. Independent variable: green process innovation

3.4.3. Green product innovation

3.4.4. Control variables

• In the first step, descriptive statistics of the variables were taken.

The flow of analysis can be seen in Fig. 1.

Fig. 1. Analysis pattern.

4. Results and discussion

correlation between the explanatory variables.

4.1. Regression analysis

ROA 0.039 0.032 1.024 − 1.261 0.1724 1280

VIF 1.11 1.101 1.09 1.08 1.04 1.03

Note: VIF = Variance Inflation Factor.

Variables Coef. t-Stat Coef. t-Stat Coef. t-Stat

L1 0.175*** (9.340) 0.155*** (10.440) 0.135*** (8.340)

Variables Coef. t-Stat Coef. t-Stat Coef. t-Stat

L1 0.147*** (4.35) 0.149* (1.73) 0.101 (0.99)

Variables Coef. t-Stat Coef. t-Stat Coef. t-Stat

L1 0.132*** (3.35) 0.139* (2.83) 0.113** (1.98)

4.2. Major findings and discussion

5. Conclusion and policy implications

5.2. Practical implications

5.3. Limitations and future directions

CRediT authorship contribution statement

Declaration of competing interest

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L1 0.175* (9.340) 0.155* (10.440) 0.135*** (8.340)