The Impact of Sustainable Environmental Innovation on Companies' Financial Performance in Far East Asia for the Period of 2012-2019

Abstract

This study aims to determine the effect of environmental innovation on companies' financial performance. The total sample used in this research is 275 publicly listed companies operating in China, Japan, South Korea, Hong Kong, Singapore, Taiwan, Indonesia, Malaysia, and the Philippines for the period of 2012-2019. In constructing the analysis, this study uses balanced panel data and robust fixed effect model. The result suggests insignificant relationship between environmental innovation and companies' financial performance in the short-term. While in the longer term, this study shows a significant relationship between environmental innovation and companies' financial performance. However, there are inconsistencies still found in the relationship between the two variables due to negative and positive associations in the regression result. This is mainly because the innovation success can be affected by other factors such as the innovation management and the market introduction timing as well. Thus, future research needs to take those factors into account when trying to identify the impact of innovation on financial performance.