Green Innovation and Financial Performance: Bridging the Profitability-Sustainability Gap

Abstract

In the current era of a knowledge-based green economy, green innovation has emerged as an important driver for firms to improve their financial performance. Recent studies have emphasized the significance of green innovation in addressing environmental degradation and enhancing financial performance. Few studies have been conducted about green innovation and its effects within the context of Pakistan. This study seeks to examine the impact of green innovation on the financial performance of publicly listed firms on the Pakistan Stock Exchange (PSX). The study utilized a dataset comprising 2702 observations from 351 listed companies from 2013 to 2021. The data was analyzed using weighted least square regression analysis. The study's empirical research indicates that Green Innovation has a statistically modest yet positive effect on Financial Performance in Pakistan. The research indicates that Green Innovation is significant for Financial Performance in developing countries like Pakistan. The study's findings and policy recommendations are significant for managers of various companies listed at PSX and policymakers. They can help in addressing environmental degradation and promoting sustainable development by implementing green innovation practices.