Unveiling the influence of financial slack on carbon performance: insights from firms in Malaysia’s smart cities

Abstract

Abstract As carbon emissions in lower-income countries are projected to rise and surpass those of higher-income countries, they face mounting political pressure to fulfil their commitments under international agreements. As a key participant in carbon emissions abatement, firms can have a strong effect on carbon emissions reduction. However, the successful implementation of carbon emission reductions may hinge on the financial slack of firms. This study investigates the impact of financial slack on the carbon performance of Malaysian smart city firms. The sample includes 64 firms located in four smart cities within the ASEAN Smart City Network (ASCN). The analysis is based on data compiled in 2021, with carbon performance data obtained from the annual reports of firms and financial data obtained from the DataStream Refinitiv Eikon platform. Using regression analysis, the results indicate that financial slack has no significant effect on the carbon performance of Malaysian smart city firms. This study contributes to the growing body of knowledge on financial slack and carbon performance in smart cities. The findings could be beneficial for practitioners and policymakers concerned with improving financial flexibility and reducing carbon emissions.