The impact of environmental practices on financial performance: Do reputation, institutional environment, and industry type matter?

Green Finance, 7(3): 429–449. DOI: 10.3934/GF.2025016 Received: 31 January 2025 Revised: 16 June 2025 Accepted: 27 June 2025 Published: 09 July 2025 https://www.aimspress.com/journal/GF Research article The impact of environmental practices on financial performance: Do reputation, institutional environment, and industry type matter? Bernabé Escobar-Pérez, Silvia Fresneda-Fuentes and María del Mar Miras-Rodríguez* Accounting and Finance Department, Faculty of Business and Economics, University of Seville, Seville, Spain Correspondence: Email: [email protected]; Tel: +34954556067. Abstract: The impact that environmental practices have on companies’ performance has often been analyzed in the literature, and the findings are inconclusive. Several researchers argue that further evidence is needed to better understand this relationship, and in particular, the effect that some variables could have on it. Consequently, the main aim of this research was to analyze whether company reputation, the institutional environment, and industry affect the impact of environmentally friendly practices on financial performance. The research found its theoretical foundation in ecoefficiency, trade-off, institutional, and agency theories. The sample comprised 198 high-performing manufacturing companies across 9 countries. Data were collected using a specific questionnaire designed to capture managers’ perceptions of the relevant variables and analyzed through partial least squares structural equation modeling. The findings indicate that environmentally friendly practices positively influence companies’ financial performance. However, contrary to previous evidence, company reputation does not appear to mediate this relationship. Instead, the institutional environment as well as the subsector in which a company operates play a moderating role. These findings are particularly valuable for managers since they reinforce the rationale for adopting proactive environmental strategies. This research contributes to previous literature, providing new insights about the impact of environmentally friendly behaviors on financial performance within the context of manufacturing companies, as well as the roles that reputation and institutional environments play in this relationship. Keywords: environmental practices; financial performance; reputation; institutional environment 430 Green Finance Volume 7, Issue 3, 429–449. JEL Codes: M14 1. Introduction Organizations are increasingly compelled to address sustainability challenges because investors are increasingly concerned about sustainability and less tolerant of companies that harm the natural ecosystem (Bolton and Kacperczyk, 2021; Fleitas-Castillo et al., 2025). Additionally, environmental regulations are becoming increasingly stringent globally (Pérez et al., 2011). This pressure is higher in sectors such as manufacturing (Baah et al., 2021b), whose production activities are often associated with significant environmental pollution (Bello-Pintado et al., 2023). Adopting environmentally friendly practices (EP) often requires companies to face high costs associated with investments in new machinery or materials (Hart and Ahuja, 1996). This high initial cost could be compensated, at least partially, by cost savings, since technological advancements facilitate lower energy consumption and less environmental impact (Lafont et al., 2023). Based on the literature, engaging in specific EP can enhance organizational outcomes by meeting stakeholders’ expectations (Ahmadi-Gh and Bello-Pintado, 2022), since consumers increasingly consider the environmental impact of companies (Feng and Wang, 2016; Khan et al., 2023) in their purchase decisions. Consequently, carrying out EP can be long-term profitable (Porter and Van der Linde, 1995). Although most findings from the prior literature on manufacturing support the positive effect (Baah et al., 2021b; Habib, 2023; Jum´a et al., 2021; Liu et al., 2022; Tzouvanas et al., 2020), some non-significant effects are found (Aigbedo, 2021; Alexopoulos et al., 2018). Consequently, the importance of examining the moderating and/or mediating roles of certain variables in this relationship has been suggested, as these could help explain the observed disparities (Sarfraz et al., 2023; Turkcan, 2025; Zhang et al., 2019). Even though several scholars have argued that reputation could be key to better understand the relationship between EP and financial performance (FP) (Hammami and Othmani, 2024), the results do not always support the existence of a mediator role (Afum et al., 2020; Baah et al, 2021a; Farza et al., 2021; Jing et al., 2023), but the majority of the samples are from one developing country. Furthermore, the link between sustainability issues and FP varies depending on the cultural characteristics of the countries where companies operate (Miras-Rodríguez et al., 2018; Saha et al., 2024; Scholtens and Kang, 2013) and the key role of industry (Aigbedo, 2021). Analyzing the moderator role of the institutional environment and subsector would help to better understand the EP– FP relationship. The objectives of this research are twofold: (1) to analyze the impact of EP on companies’ FP, and (2) to investigate the mediating role of reputation and the moderating role of the institutional environment and industry in this relationship. To conduct our research, an international database of companies participating in the HighPerformance Manufacturing (HPM) project will be examined, which includes data from three industries: machinery, electronics, and automotive components. This database was created based on responses from managers of manufacturing companies to a regular survey that addressed sustainability topics in its most recent round (Ahmadi-Gh and Bello-Pintado, 2022; Bello-Pintado et al., 2023). The sample contains data from nine countries. To test our hypotheses, structural equation modeling (SEM) 431 Green Finance Volume 7, Issue 3, 429–449. will be employed, specifically using partial least squares (PLS) methodology following most of the research in the field (Afum et al., 2020; Baah et al., 2021b). The findings indicate that implementing environmentally sustainable practices has a beneficial effect on FP. Notably, while the hypothesized mediating role of reputation was not substantiated, the data do support the moderating effects of the national context, influenced by institutional environments and industry subsectors. Our findings contribute to the debate on the EP–FP relationship by providing evidence of a positive impact when considering a multi-country sample. In addition, the supported moderator role of the institutional environment and the subsector should lead researchers to control their analyses by considering both variables. The remainder of the paper is organized as follows: first, the theoretical framework and hypotheses will be developed. The subsequent section will focus on the sample and methodology. Following that, the results will be shown. Finally, the research will be discussed, as well as the conclusions and limitations. 2. Theoretical background The existing academic literature employs a variety of theoretical frameworks to elucidate the adoption of sustainability practices (Dos Reis Cardillo and Cruz Basso, 2025; Habib, 2023). In this context, stakeholder theory, legitimacy theory, and institutional theory offer significant insights into the motivations behind organizational engagement in sustainability. Stakeholder theory, as posited by Freeman (1984), asserts that by prioritizing the interests of a broad spectrum of stakeholders beyond merely shareholders, organizations can foster sustainable value creation, thereby enhancing FP. In the same line, legitimacy theory, as articulated by Suchman (1995), posits that organizations actively seek to align their operations and strategies with society’s prevailing norms and expectations. This alignment is crucial for organizations to acquire, sustain, or restore legitimacy amongst their stakeholders. In essence, organizations must engage in practices that are perceived as socially acceptable to secure their standing and credibility within the community. Within the realm of sustainability, firms often undertake initiatives to secure financial returns and bolster their legitimacy. To do so can also be considered an “informal” prerequisite for operating in specific markets (Peloza, 2006). Moreover, as discussed by DiMaggio and Powell (1983), institutional theory posits that isomorphic processes may serve as mechanisms for enhancing organizational legitimacy. Concerning environmentally sustainable initiatives, the trade-off theory (Friedman, 1970) provides a framework that underscores the potential negative implications of such initiatives on a company’s FP. Implementing environmentally friendly practices often necessitates considerable investments (Hart and Ahuja, 1996), which are readily observable. In contrast, the benefits derived from these practices may be more challenging to quantify, as not all initiatives yield direct and immediate outcomes (Iatridis, 2013; Meng et al., 2016). Conversely, the eco-efficacy theory (Porter and Van der Linde, 1995) and the resource-based theory (Barney, 1996) contend that environmentally sustainable practices are strategic resources that confer competitive advantages upon firms. Following the initial investment, organizations can realize “certain” cost savings through resource optimization (Al-Tuwaijri et al., 2004; Ali et al., 2025), reductions in pollutant emissions (Gallego, 2012; Smale et al., 2006), or the mitigation of penalties associated with regulatory non-compliance (Carballo and Castromán, 2015). Additionally, indirect benefits may arise, such as the attraction of consumers who 432 Green Finance Volume 7, Issue 3, 429–449. favor environmentally responsible companies (Luo and Bhattacharya, 2006) and the reduction of capital costs (Godfrey et al., 2009). In light of the agency theory, as described by Jensen and Meckling (1976), it is suggested that managers might pursue sustainability initiatives primarily for their gain (incentives) or to enhance their reputation. Therefore, engaging in certain practices can either enhance or undermine an organization’s FP, depending on whether incentive schemes are linked to FP, sustainability, or both (Cohen et al., 2023; Jang et al., 2022; Keddie and Magnan, 2023; Velte, 2016). In addition, managers usually have a short-term vision, while shareholders also consider the long-term. Based on this premise, it should also be considered that investments and returns of environmentally friendly initiatives could be lagged. 3. Literature review and hypothesis development The relationship between EP and FP has been the subject of several meta-analyses (Albertini, 2013; Dixon-Fowler et al., 2013; Endrikat et al., 2014; Hang et al., 2019). While there is a consensus that greater resource availability increases the likelihood of engaging in environmentally friendly practices (Čater et al., 2023; Laguir et al., 2018; Testa and D’Amato, 2017), the results regarding the impact of such practices on a company’s performance are heterogeneous (Aigbedo, 2021; Alexopoulos et al., 2018; Ali et al., 2025; Baah et al., 2021b; Farza et al., 2021; Habib, 2023; Jum´a et al., 2021; Liu et al., 2022). In other words, is it truly beneficial to adopt green initiatives? Having an answer to this question is critically important for companies, particularly those that face greater pressure to adopt environmentally friendly practices due to their operations’ negative environmental impacts. Although companies would obtain a positive performance from implementing sustainable initiatives from a legitimacy point of view and from satisfying all stakeholders’ expectations, practices focused on the environment have a distinctive characteristic: the high initial investment that most of them imply. Based on the trade-off arguments, the initial investments are “certain”, while some associated costs are more challenging to identify because some are indirect and/or there is a lag in obtaining the benefits. In the same line, Goss and Robert (2011) argue that large expenditures in Environmental, Social and Governance (ESG) tie up financial resources and reduce business value. On the other hand, based on the eco-efficiency arguments and resource-based view, the balance between the cost/investment and the associated returns is positive. Together with the “certain” costsaving, the indirect benefits supported by the literature should be considered. The certainty of the “investments/expenses” and the uncertainty of the indirect “benefits” associated with them could lead to agency conflicts (Wu and Xie, 2024) among managers and shareholders. The level of managerial engagement in environmentally sustainable initiatives may vary based on the specific inputs utilized in determining incentive structures. If they are only linked to FP, the high cost of implementing EP or those with uncertain returns would not be carried out (Jang et al., 2022; Mansour et al., 2024). When the incentives depend only on sustainable performance, there is an increase in engagement with sustainability, although FP does not improve (Cohen et al., 2023). Nonetheless, if the incentive structure encompasses sustainable and FP metrics, managers may be more committed to sustainability while focusing on financial viability (Flammer et al., 2019). Considering that most of the empirical evidence regarding manufacturing industries indicates a positive impact of EP on companies’ performance (Ali et al., 2025; Baah et al., 2021b; Habib, 2023; 433 Green Finance Volume 7, Issue 3, 429–449. Jum´a et al., 2021; Liu et al., 2022; Pons et al., 2013; Sen, 2015; Tzouvanas et al., 2020), our first hypothesis is stated: H1: EP has a positive impact on companies’ FP. Numerous researchers have highlighted the crucial mediating role of reputation, as an intangible asset, in the relationship between EP and FP (Brammer and Pavelin, 2006; Jing et al., 2023; Larrán et al., 2015; Neville et al., 2005; Surroca et al., 2010). According to Newbert (2007), establishing competitive advantages through intangible resources like reputation is vital for a firm’s success (resource-based theory) due to the difficulty of imitation. Although empirical research on the direct effects of sustainability practices on corporate reputation is limited (Baraibar-Diez and Luna-Sotorrio, 2018), a company’s environmental friendliness can significantly influence its reputation—either positively or negatively—depending on whether the actions are perceived as symbolic or substantive (Truong et al., 2021). If the practices are seen as symbolic gestures, reputation tends to decline, while substantive actions typically enhance it. All stakeholders take into account the company’s reputation as a significant factor influencing their decision-making processes. However, it is important to note that price remains a critical component in these evaluations (Bendixen et al., 2004). Previous research on the manufacturing industry is mixed. While Farza et al. (2021) supported the mediation effect, Afum et al. (2020) and Baah et al. (2021a) found no significant mediation role. Hence, we established our second hypothesis: H2: The relationship between EP and FP will be mediated by a company’s environmental reputation. Previous literature has highlighted the significant role that the institutional environment plays in shaping how EP impacts organizations’ FP (Horváthová, 2010; Hou et al., 2016; Miras-Rodríguez et al., 2018; Saha et al., 2024; Waldman et al., 2006). This notion is theoretically grounded in institutional theory (Baughn et al., 2007; Matten and Moon, 2008). Given that legal requirements vary across countries, stakeholder expectations are likely to be more aligned in nations that share greater similarities (Jamali and Mirshak, 2006). Bai and Chang (2015) noted that sustainability initiatives tend to be valued more in developed countries, although the evidence in emerging economies remains ambiguous (Tsai et al., 2020). In the context of manufacturing companies, evidence supports the longterm implementation of EP in developed countries (Chen et al., 2015). Nevertheless, Naeem et al. (2022) discussed that companies within environmentally sensitive industries, such as manufacturing, from developed countries report a positive effect, while the undertakings from emerging countries present a lack of significant effect. In this line, Baah et al. (2021b) contended that some companies in developing nations deny integrating EP, while others try to incorporate them, considering their limited resource capacity. Maldonado-Guzman (2024) argued that manufacturing firms in Mexico have ignored the environmental consequences of their operations. Nevertheless, other studies suggested that there has been a growing concern over environmental issues in recent years within developing and emerging countries, largely driven by the necessity to export (Chen et al., 2015). Furthermore, Zhu and Sarkis (2004) emphasized the crucial role of FP in motivating engagement in EP. Taking into account the approach of Barnett and Salomon (2012), variations in FP can be attributed to the differing stages of commitment to environmental issues among various enterprises or countries. For Western companies that have a long-standing tradition of EP, strong ethical practices may not yield significant rewards, while bad practices are likely to face negative consequences (Margolis and Walsh, 2003). In contrast, institutional environments that have recently adopted EP 434 Green Finance Volume 7, Issue 3, 429–449. often experience significant financial benefits and are not penalized for lacking commitment (Dallocchio et al., 2025; Ha et al., 2024). The EP implemented by companies with a longstanding commitment to environmental responsibility may receive comparatively less recognition than organizations from countries with a more recent commitment. This leads to our third hypothesis: H3: The relationship between EP and FP will be moderated by the institutional environment. Numerous researchers have highlighted the industry’s significant role in this relationship (Aigbedo, 2021; Margolis and Walsh, 2003; Waddock and Graves, 1997). They have claimed that the lack of consensus previously argued can be attributed to the compensation or overlapping of results derived from cross-sectional samples because stakeholder pressures differ across industries (Patten, 2002). Manufacturing companies are highly aware of environmental issues. Nevertheless, since there are three sectors involved in the sample, it is important to test for differences among them. Consequently, the fourth hypothesis states that: H4: The relationship between EP and FP will be moderated by the subsector. Figure 1 shows a representation of all the hypotheses previously stated. Figure 1. Map of the hypotheses. Source: Authors’ own work 4. Methodology The sample is composed of companies engaged in the High-Performance Manufacturing (HPM) project, which involves the machinery, electronics, and automotive components industries. The HPM project database represents an international compilation of data derived from responses provided by managers through a systematic survey administered to a representative sample of manufacturing plants. The questionnaire, designed for the collection of sustainability-related metrics, is grounded in measures that have been rigorously validated in the academic literature (Ahmadi-Gh and Bello-Pintado, 2022; Bello-Pintado et al., 2023). Each sustainability item is assessed using a Likert scale, with values ranging from 1 to 5. 435 Green Finance Volume 7, Issue 3, 429–449. The sample encompasses companies from nine countries: Brazil, China, Germany, Israel, Italy, Japan, South Korea, Spain, and Sweden. A total of 198 observations have been aggregated. The distribution of these observations, categorized by country and industry, is presented in Table 1. Table 1. Sample distribution. The present analysis incorporates several key variables: environmental practices (EP), financial performance (FP), reputation, institutional environment, and industry. The EP variable is derived from a comprehensive evaluation of 41 distinct indicators outlined in the HPM project (Miras-Rodriguez et al., 2018). The FP and reputation variables are each represented by a single item measured on a Likert scale ranging from 1 to 5. Specifically, the FP variable encapsulates managers’ perceptions of the FP attained by the organization as a result of implementing environmental initiatives. In contrast, the reputation variable reflects managers’ perceptions of the enhancement in reputation that arises from engaging in environmentally sustainable practices. The majority of the existing literature on this subject tends to concentrate either on a singular group of countries or comparative analyses across different nations (Chapple and Moon, 2005; Welford, 2005). Among the various methodologies available for assessing the institutional environment, the Governance Environment Index, as proposed by Li and Filer (2007), has been selected due to its robust complexity and ability to mitigate some of the limitations associated with alternative cultural classifications (Miras and Escobar, 2016). Recognizing the countries involved in the HPM project and utilizing the classification framework established by Li and Filer (2007), the total sample can thus be categorized into two distinct sub-samples: rule-based countries (comprising Germany, Italy, Japan, Korea, Spain, and Sweden) and relation-based countries (including Brazil, China, and Israel). Finally, the analysis identifies three sub-industries within the sample—machinery, electronics, and automotive components—pertinent to the industry variable. 4.1. Method Structural equation modeling (SEM) represents a sophisticated multivariate technique that integrates components of multiple regression and factor analysis to concurrently estimate a series of interrelated dependence relationships. This methodological approach has gained considerable traction in recent years across various disciplines, particularly within the social and management sciences. Countr y Machiner y Electronics Automotive components Total Brazil 3 7 9 19 China 6 7 9 22 German y 6 12 8 26 Israel 14 3 0 17 Ital y 7 17 5 29 Japan 8 5 13 26 South Korea 9 18 1 28 Spain 5 6 11 22 Sweden 4 4 1 9 TOTAL 62 79 57 198 436 Green Finance Volume 7, Issue 3, 429–449. SEM analysis can be executed through two principal statistical techniques (Roldán and SánchezFranco, 2012): covariance-based approaches, exemplified by LISREL and AMOS, and variance-based methods, such as partial least squares (PLS). Given the nature of our model, which incorporates formative indicators, PLS is deemed more appropriate for analysis (Henseler et al., 2009). In the context of SEM, it is imperative to assess both the measurement model, which delineates the composition of each latent variable, and the structural model, which elucidates the causal relationships among the latent variables. This dual evaluation is crucial for ensuring the robustness and validity of the resulting analysis. This study uses SmartPLS 4 software (Ringle et al., 2022). 4.1.1. Measurement model Consistent with the existing literature, the latent variable (EP) is constructed using formative indicators, as each indicator or item contributes to its formation (Chin, 1998). As was argued by Hair et al. (2021, 2022) and Cheah et al. (2018), it is considered that the variables are theoretically designed to be formative, assessing collinearity and the significance and relevance of the formative indicators. To evaluate the validity of the measurement model, it is essential to assess the weights of the indicators, given that parameters are not applicable for reflective indicators. These weights provide insights into which indicators significantly influence our latent variable. 4.1.2. Structural model Once the validity of the outer model was established, it was possible to test the hypotheses. This involves quantifying the proposed causal relationships using the PLS algorithm, which calculates each dependent construct’s path coefficients and R2 values. To assess the significance of the parameters, a bootstrapping analysis was conducted with 10,000 resamples, as recommended in the literature (Streukens and Leroi-Werelds, 2016). Furthermore, additional tests are necessary to examine the mediating and moderating roles of the variables. To test the mediating effect of reputation, a comparison must be made between the model without the mediator variable and the model that includes it. This mediation can be classified as either partial or total, depending on the significance of the parameters. If the path coefficient of the primary relationship is significant but loses significance once the mediator variable is introduced, the mediation is considered total. Conversely, if the primary relationship remains significant after adding the mediator variable, the mediation is deemed partial. When a mediator variable is included in the analysis, the total path coefficient effects are presented, and their significance is calculated using bias-corrected bootstrapping with 10,000 resamples (Chin, 2010). A multi-group analysis is imperative to evaluate the moderating effect of the cultural environment (Henseler and Fassott, 2010). This analytical approach entails partitioning the sample into distinct groups based on the moderator variable and applying the model to each subgroup. In the context of moderation analysis, it is essential to give careful consideration to measurement invariance (Sarstedt et al., 2011). In particular, the advanced measurement invariance through the measurement invariance of composite models (MICOM) based on the permutation technique developed by Henseler et al. (2016) was used. Among the different techniques, the permutation multigroup analysis was used (Chin, 2003; Chin and Dibbern, 2010) when the number of groups was two. For robustness, bootstrap multigroup analysis (Henseler, 2012) was also performed. 437 Green Finance Volume 7, Issue 3, 429–449. 5. Results First, the measurement model should be validated. Then, collinearity, significance, and relevance of EP, as a formative construct, were assessed. Thus, a collinearity analysis was carried out, and the variance inflation factor (VIF) was examined considering the threshold of 3.3 (Diamantopoulos and Siguaw, 2006). Consequently, 10 items were deleted1. In addition, the significance and relevance of the items were assessed by considering those whose weights would be higher than 0.5 or, on the contrary, those whose loadings are statistically significant (Hair et al., 2021). Then, only 29 items remain (Table 2). Table 2. Weights of final items for EP. Ori g inal sample (O) Sample mean (M) Standard deviation (STDEV) T statistics ( | O/STDEV | ) EP01 0.246 0.217 0.135 1.822 EP02 0.063 0.042 0.138 0.458 EP04 −0.351 −0.305 0.137 2.568 EP05 −0.13 −0.116 0.149 0.873 EP06 0.048 0.036 0.164 0.295 EP07 0.336 0.286 0.156 2.156 EP08 −0.18 −0.143 0.185 0.976 EP09 −0.162 −0.125 0.147 1.102 EP12 0.342 0.284 0.152 2.255 EP13 −0.035 −0.049 0.15 0.236 EP14 0.091 0.079 0.169 0.536 EP15 −0.064 −0.045 0.196 0.326 EP17 0.047 0.026 0.142 0.333 EP18 0.092 0.072 0.168 0.547 EP20 −0.226 −0.181 0.141 1.607 EP21 −0.25 −0.224 0.15 1.671 EP22 0.039 0.036 0.158 0.247 EP24 0.4 0.341 0.156 2.563 EP29 0.412 0.349 0.186 2.215 EP30 0.112 0.08 0.141 0.793 EP31 −0.15 −0.118 0.151 0.999 EP32 0.152 0.127 0.174 0.876 EP33 −0.009 0.026 0.17 0.055 EP34 −0.17 −0.141 0.146 1.166 EP35 −0.004 −0.016 0.2 0.018 EP36 0.052 0.054 0.161 0.325 EP37 −0.135 −0.108 0.138 0.982 EP38 0.149 0.141 0.159 0.933 EP39 0.311 0.27 0.146 2.124 Table 2 outlines the indicators that exert a strong positive influence on EP: (1) energy efficiency or renewable energy, (2) seeking or maintaining an ISO14001 certification, (3) encouraging suppliers to improve the environmental performance of their processes, and (4) providing design specifications to suppliers in line with environmental requirements. Conversely, improving the workforce environment, the life-cycle analysis of the “cradle-to-grave” environmental impact of materials/products, and environmentally preferable direct packaging for the products you produce adversely affect EP. 1 EP10, EP11, EP16, EP19, EP25, EP26, EP27, EP28, EP40, EP41. 444 Green Finance Volume 7, Issue 3, 429–449. Bello-Pintado A, Machuca JA, Danese P (2023). Stakeholder pressures and sustainability practices in manufacturing: Consideration of the economic development context. Bus Strategy Environ 32: 4084–4102. https://doi.org/10.1002/bse.3355 Bendixen M, Bukasa A, Abratt R (2004) Brand equity in the business-to-business market. Ind Market Manag 33: 371–380. https://doi.org/10.1016/j.indmarman.2003.10.001 Bolton P, Kacperczyk M (2021) Do investors care about carbon risk? J Financ Econ 142: 517–549. https://doi.org/10.1016/j.jfineco.2021.05.008 Brammer SJ, Pavelin S (2006) Corporate reputation and social performance: the importance of fit. J Manage Stud 43: 435–455. https://doi.org/10.1111/j.1467-6486.2006.00597.x Carballo A, Castromán JL (2015) Environmental policies for sustainable development: an analysis of the drivers of proactive environmental strategies in the service sector. Bus Strateg Enviro 24: 802– 818. https://doi.org/10.1002/bse.1847 Čater T, Čater B, Milić P, et al (2023) Drivers of corporate environmental and social responsibility practices: A comparison of two moderated mediation models. J Bus Res 159: 113652. https://doi.org/10.1016/j.jbusres.2023.113652 Chapple W, Moon J (2005) Corporate Social Responsibility (CSR) in Asia a Seven-Country Study of CSR Web Site Reporting. Bus Soc 44: 415–441. http://dx.doi.org/10.1016/j.jclepro.2014.02.001 Cheah JH, Sarstedt M, Ringle CM, et al. (2018) Convergent validity assessment of formatively measured constructs in PLS-SEM: On using single-item versus multi-item measures in redundancy analyses. Int. J. Hosp. Manag 30: 3192–3210. https://doi.org/10.1108/IJCHM-102017-0649 Chen L, Tang O, Feldmann A (2015) Applying GRI reports for the investigation of environmental management practices and company performance in Sweden, China and India. J Clean Prod 98: 36–46. http://dx.doi.org/10.1016/j.jclepro.2014.02.001 Chin WW (1998) Issues and opinion on structural equation modelling. MIS Q 22: 7–15. Chin WW (2003) A permutation procedure for multigroup comparison of PLS models. In Vilares, M. Tenenhaus, M., Coelho, P., Esposito Vinci, V., Morineau, A. (Eds.). Proceedings of the International Symposium PLS’03. PLS and related methods, 33–43. Lisbon: Decisia. Chin WW (2010) How to write up and report PLS analyses, In Vinzi, E.Z, Chin, W.W., Henseler, J., Wang, H. (Eds.). Handbook of Partial Least Squares: Concepts, Methods and Applications, 655– 690. Berlin: Springer. Chin WW, Dibbern J (2010) An introduction to a permutation-based procedure for multigroup PLS analysis: Results of tests of differences on simulated data and a crosscultural analysis of the sourcing of information system services between Germany and the USA. In Vinzi, E.Z., Chin, W.W., Henseler, J., Wang, H. (Eds.). Handbook of partial least squares, 171–193. Berlin: Springer. Cohen S, Kadach I, Ormazabal G, et al (2023) Executive compensation tied to ESG performance: International evidence. J Account R 61: 805–853. Dallocchio M, Pistolesi F, Teti E (2025) Conciliating environmental and financial performance in emerging countries. Fin Res Lett 74: 106781. https://doi.org/10.1016/j.frl.2025.106781 Diamantopoulos A, Siguaw JA (2006) Formative Versus Reflective Indicators in Organizational Measure Development: A Comparison and Empirical Illustration. Br J Manag 17: 263–282. https://doi.org/10.1111/j.1467-8551.2006.00500.x DiMaggio PJ, Powell WW (1983) The iron cage revisited: Institutional isomorphism and collective rationality in organizational fields. Am Sociol Rev 48: 147–160. https://doi.org/10.2307/2095101 445 Green Finance Volume 7, Issue 3, 429–449. Dixon-Fowler HR, Slater DJ, Johnson JL, et al. (2013) Beyond “Does it Pay to be Green?” A MetaAnalysis of Moderators of the CEP–CFP Relationship. J Bus Ethics 112: 353–366. https://doi.org/10.1007/s10551-012-1268-8 Dos Reis Cardillo MA, Cruz Basso, LF (2025) Revisiting knowledge on ESG/CSR and financial performance: A bibliometric and systematic review of moderating variables. J Innov Knowl 10: 100648. https://doi.org/10.1016/j.jik.2024.100648 Endrikat J, Guenther E, Hoppe H (2014) Making sense of conflicting empirical findings: A metaanalytic review of the relationship between corporate environmental and financial performance. Eur Manag J 32: 735–751. https://doi.org/10.1016/j.emj.2013.12.004 Farza K, Ftiti Z, Hlioui Z, et al. (2021) Does it pay to go green? The environmental innovation effect on corporate financial performance. J Environ Manage 300: 113695. https://doi.org/ 10.1016/j.jenvman.2021.113695 Feng T, Wang D (2016) The influence of environmental management systems on financial performance: A moderated-mediation analysis. J Bus Ethics 135: 265–278. https://doi.org/10.1007/s10551-014-2486-z Flammer C, Hong B, Minor D (2019) Corporate Governance and the Rise of Integrating Corporate Social Responsibility Criteria in Executive Compensation: Effectiveness and Implications for Firm Outcomes. Strateg Manag J 40: 1097–122. Available from: https://sms.onlinelibrary.wiley.com/doi/10.1002/smj.3018#:~:text=https%3A//doi.org/10.1002/s mj.3018 Fleitas-Castillo GDC, Peña-Martel DE, Pérez-Alemán J, et al (2025) Gender diversity on boards and environmental violations in European firms. Green Financ 7: 117–145. https://doi.org/10.3934/GF.2025005 Freeman RE (1984) Strategic management: A stakeholder approach. New York: Cambridge University Press. Friedman M (1970) The Social Responsibility of Business is to Increase Its Profits. New York Times, 122–126. Gallego I (2012) Impact of CO2 Emission Variation on Firm Performance. Bus Strategy Environ 21: 435–454. https://doi.org/10.1002/bse.1729 Godfrey PC, Merrill CB, Hansen JM (2009) The relationship between corporate social responsibility and shareholder value: an empirical test of the risk management hypothesis. Strat Manag J 30: 425–445. https://doi.org/10.1002/smj.750 Goss A, Roberts G (2011) The impact of corporate social responsibility on the cost of bank loans. J Bank Financ 35: 1794–1810. https://doi.org/10.1016/j.jbankfin.2010.12.002 Ha NM, Nguyen PA, Luan NV, et al. (2024) Impact of green innovation on environmental performance and financial performance. Environ Dev Sustain 26: 17083–17104. https://doi.org/10.1007/s10668-023-03328-4 Habib AM (2023) Do business strategies and environmental, social, and governance (ESG) performance mitigate the likelihood of financial distress? A multiple mediation model. Heliyon 9: e17847. https://doi.org/10.1016/j.heliyon.2023.e17847 Hair JF, Hult GTM, Ringle CM, et al. (2021) Evaluation of Formative Measurement Models. In Joseph F. Hair, J.F., Hult, T.G.M., Ringle, C.M., Sarstedt, M., Danks, N.P., Ray, S. (Eds). Partial Least Squares Structural Equation Modeling (PLS-SEM) Using R. Classroom Companion: Business, 91–114. Cham: Springer. https://doi.org/10.1007/978-3-030-80519-7_5 Hair JF, Hult GTM, Ringle CM, et al (2022) A Primer on Partial Least Squares Structural Equation Modeling (PLS-SEM). Los Angeles: Sage Publishing. 446 Green Finance Volume 7, Issue 3, 429–449. Hammami H, Othmani L (2024) Adopting sustainable manufacturing practices: the relationship between environmental performance and corporate reputation. Int J Organ Anal [In press]. https://doi.org/10.1108/IJOA-10-2023-4026 Hang M, Geyer-Klingeberg J, Rathgeber AW (2019) It is merely a matter of time: A meta-analysis of the causality between environmental performance and financial performance. Bus Strat Env 28: 257–273. https://doi.org/10.1002/bse.2215 Hart SL, Ahuja G (1996) Does it pay to be green? An empirical examination of the relationship between emission reduction and firm performance. Bus Strategy Enviro 5: 30–37. https://doi.org/10.1002/(SICI)1099-0836(199603)5:1<30::AID-BSE38>3.0.CO;2-Q Henseler J (2012) PLS-MGA: A non-parametric approach to partial least squares-based multigroup analysis In W.A. Gaul, A. Geyer-Schulz, L. Schmidt-Thieme, J. Kunze (Eds.). Challenges at the interface of data analysis, computer science, and optimization, 495–501. Berlin Heidelberg: Springer. https://doi.org/10.1007/978-3-64224466-7_50 Henseler J, Fassott G (2010) Testing moderating effects in PLS path models: an illustration of available procedures, In: Vinzi, E.Z, Chin, W.W., Henseler, J., Wang, H. (Eds.). Handbook of Partial Least Squares: Concepts, Methods and Applications, 655–690. Berlin: Springer. Henseler J, Ringle CM, Sinkovics RR (2009) The use of partial least squares path modeling in international marketing, In Sinkovics, R.R., Ghauri, P.N. (Eds.). New Challenges to International Marketing, 277–319. United Kingdom: Emerald. Henseler J, Sinkovics R, Daekwan Kim R, et al. (2016). Testing measurement invariance of composites using partial least squares. Int Mark Rev 33: 405–431. https://10.1108/imr-09-2014-0304 Horváthová E (2010) Does environmental performance affect financial performance? A meta-analysis. Ecol Econ 70: 52–59. https://doi.org/10.1016/j.ecolecon.2010.04.004 Hou M, Liu H, Fan P, et al. (2016) Does CSR practice pay off in East Asian firms? A meta-analytic investigation. Asia Pac J Manag 33: 195–228. https://doi.org/10.1007/s10490-015-9431-2 Hult GTM, Hair JF, Proksch D, et al. (2018) Addressing endogeneity in international marketing applications of partial least squares structural equation modeling. J Int Mark 26: 1–21. https://doi.org/10.1509/jim.17.0151 Iatridis G (2013) Environmental disclosure quality: Evidence on environmental performance, corporate governance and value relevance. Emerg Mark Rev 14: 55–75. https://doi.org/10.1016/j.ememar.2012.11.003 Jamali D, Mirshak R (2006) Corporate Social Responsibility (CSR): Theory and Practice in a Developing Country Context. J Bus Ethics 72: 243–262. https://doi.org/10.1007/s10551-0069168-4 Jang GY, Kang HG, Kim W (2022) Corporate executives’ incentives and ESG performance. Finance Researc Lett 49: 103187. https://doi.org/10.1016/j.frl.2022.103187 Jensen MC, Meckling, WH (1976) Theory of the firm: Managerial behavior, agency costs and ownership structure. J Finan Econ 3: 305–360. https://doi.org/10.1016/0304-405X(76)90026-X Jing Z, Hossain GMS, Rahman MS, et al. (2023) Does corporate reputation play a mediating role in the association between manufacturing companies’ corporate social responsibility (CSR) and financial performance? Green Financ 5: 240–264. https://doi.org/ 10.3934/GF.2023010 Jum’a L, Zimon D, Ikram M (2021) A relationship between supply chain practices, environmental sustainability and financial performance: evidence from manufacturing companies in Jordan. Sustainability 13: 2152. https://doi.org/10.3390/su13042152 447 Green Finance Volume 7, Issue 3, 429–449. Keddie SL, Magnan M (2023) Are ESG performance-based incentives a panacea or a smokescreen for excess compensation? Sustain Account Manag Policy J 14: 591–634. https://doi.org/10.1108/SAMPJ-11-2022-0605 Khan SAR, Yu Z, Farooq K (2023) Green capabilities, green purchasing, and triple bottom line performance: Leading toward environmental sustainability. Bus Strategy Environ 32: 2022–2034. https://doi.org/10.1002/bse.3234 Lafont A, Saura JR, Ribeiro-Soriano D (2023) The role of cooperatives in sustainable development goals: A discussion about the current resource. Resour Policy 83: 103670. https://doi.org/10.1016/j.resourpol.2023.103670 Laguir I, Marais M, El Baz J, et al. (2018) Reversing the business rationale for environmental commitment in banking: Does financial performance lead to higher environmental performance? Manag Decis 56: 358–375. https://doi.org/10.1108/MD-12-2016-0890 Larrán M, Herrera J, Martínez D, et al. (2015) Competitiveness and environmental performance in Spanish small and medium enterprises: is there a direct link? J Clean Prod 101: 26–37. https://doi.org/10.1016/j.jclepro.2015.04.016 Li S, Filer L (2007) The effects of the governance environment on the choice of investment mode and the strategic implications. J World Bus 42: 80–98. https://doi.org/10.1016/j.jwb.2006.11.006 Liu Y, Kim CY, Lee EH, et al (2022) Relationship between sustainable management activities and financial performance: Mediating effects of non-financial performance and moderating effects of institutional environment. Sustainability 14: 1168. https://doi.org/10.3390/su14031168 Luo X, Bhattacharya CB (2006) Corporate social responsibility, customer satisfaction, and market value. J Mark 70: 1–18. https://doi.org/10.1509/jmkg.70.4.001 Maldonado-Guzmán G (2024) Green innovation mediates between financial innovation and business sustainability? Proof in the Mexican manufacturing industry. Green Financ 6: 563–584. https://doi.org/10.3934/GF.2024021 Mansour M, Saleh MW, Marashdeh Z, et al. (2024) Eco-innovation and financial performance nexus: does company size matter? J Open Innov Technol Mark Compl 10: 100244. https://doi.org/10.1016/j.joitmc.2024.100244 Margolis JD, Walsh JP (2003) Misery loves companies: Rethinking social initiatives by business. Adm Sci Q 48: 268–305. http://dx.doi.org/10.2307/3556659 Matten D, Moon J (2008) Implicit and explicit CSR: A conceptual Framework for a comparative understanding of Corporate Social Responsibility. Acad Manag Rev 33: 404–424. https://doi.org/10.5465/amr.2008.31193458 Meng XH, Zeng SX, Xie XM, et al. (2016) The impact of product market competition on corporate environmental responsibility. Asia Pac J Manag 33: 267–291. https://doi.org/10.1007/s10490015-9450-z Miras-Rodríguez MM, Escobar-Pérez B (2016) Does the institutional environment affect CSR disclosure? The role of governance. Rev Adm Empres 56: 641–654. https://doi.org/10.1590/S0034-759020160606 Miras-Rodríguez MM, Machuca JA, Escobar-Pérez B (2018) Drivers that encourage environmental practices in manufacturing plants: A comparison of cultural environments. J Clean Prod 179: 690–703. https://doi.org/10.1016/j.jclepro.2017.11.029 Naeem N, Cankaya S, Bildik R (2022) Does ESG performance affect the financial performance of environmentally sensitive industries? A comparison between emerging and developed markets. Borsa Istanb Rev 22(2): S128–S140. https://doi.org/10.1016/j.bir.2022.11.014 448 Green Finance Volume 7, Issue 3, 429–449. Neville BA, Bell SJ, Mengüç B (2005) Corporate reputation, stakeholders and the social performancefinancial performance relationship. Eur J Mark 39: 1184–1198. https://doi.org/10.1108/03090560510610798 Newbert S (2007) Empirical research on the resource-based view of the firm: an assessment and suggestions for future research. Strateg Manage J 28: 121–146. https://doi.org/10.1002/smj.573 Patten DM (2002) The relation between environmental performance and environmental disclosure: a research note. Account Organ Soc 27: 763–773. https://doi.org/ 10.1111/jiec.13002 Peloza J (2006) Using corporate social responsibility as insurance for financial performance. Calif Manag Rev 48: 52–72. https://doi.org/10.2307/41166338 Pérez E, Milanés P, Meseguer ML, et al (2011) Eco-Efficiency: Effects on Economic and Financial Performance. Evidence from Dow Jones Sustainability Index Europe. Environ Eng Manag J 10: 1801–1808. https://doi.org/10.30638/eemj.2011.243 Pons M, Bikfalvi A, Llach J, et al. (2013) Exploring the impact of energy efficiency technologies on manufacturing firm performance. J Clean Prod 52: 134–144. https://doi.org/10.1016/j.jclepro.2013.03.011 Porter ME, Van der Linde C (1995) Green and competitive: ending the stalemate. Harv Bus Rev 73: 120–134. Riggs R, Felipe CM, Roldán JL, et al (2024) Information systems capabilities value creation through circular economy practices in uncertain environments: A conditional mediation model. J Bus Res 175: 114526. https://doi.org/10.1016/j.jbusres.2024.114526 Ringle CM, Wende S, Becker J (2022) SmartPLS 4. SmartPLS. Available from: https://www.sma rtpls.com. Roldán JL, Sánchez-Franco MJ (2012) Variance-based structural equation modeling: guidelines for using partial least squares in information systems research, In Mora, M. (Ed.). Research Methodologies, Innovations and Philosophies in Software Systems Engineering and Information Systems, 193–221. IGI Global. Saha S, Hasan AR, Rezewanul Islam K, et al. (2024) Sustainable Development Goals (SDGs) practices and firms’ financial performance: Moderating role of country governance. Green Financ 6: 162– 198. https//doi.org/10.3934/GF.2004007 Sarfraz M, Ozturk I, Yoo S, et al. (2023) Toward a new understanding of environmental and financial performance through corporate social responsibility, green innovation, and sustainable development. Humanit Soc Sci Commun 10: 297. https://doi.org/10.1057/s41599-023-01799-4 Sarstedt M, Henseler J, Ringle CM (2011) Multigroup analysis in partial least squares (PLS) path modeling: Alternative methods and empirical results, In Sarstedt, M., Schwaiger, M., CR Taylor, C.R. (Eds.). Measurement and Research Methods in International Marketing, 195–218, United Kingdom: Emerald. Sarstedt M, Ringle CM, Cheah JH, et al. (2020) Structural model robustness checks in PLS-SEM. Tour Econ 26: 531–554. https://doi.org/10.1177/1354816618823921 Scholtens B, Kang FC (2013) Corporate social responsibility and earnings management: evidence from Asian economies. Corp Soc Responsib Environ Manag 20: 95–112. https://doi.org/10.1002/csr.1286 Sen, P (2015) Exploring Role of Environmental Proactivity in Financial Performance of Manufacturing Enterprises: A Structural Modelling Approach. J Clean Prod 108: 583–594. https://doi.org/10.1016/j.jclepro.2015.05.076 Sharma PN, Sarstedt M, Shmueli G, et al. (2019) PLS-based model selection: The role of alternative explanations in information systems research. J Assoc Inf Syst 20: 346–397. https://doi.org/10.17705/1jais.00538 449 Green Finance Volume 7, Issue 3, 429–449. Smale R, Hartley M, Hepburn C, et al. (2006) The impact of CO 2 emissions trading on firm profits and market prices. Clim Policy 6: 31–48. https://doi.org/10.1080/14693062.2006.9685587 Streukens S, Leroi-Werelds S (2016) Bootstrapping and PLS-SEM: A step-by-step guide to get more out of your bootstrapping results. Eur Manag J 34: 618–632. https://doi.org/10.1016/j.emj.2016.06.003 Suchman MC (1995) Managing Legitimacy: Strategic and Institutional Approaches. The Acad Manage Rev 20: 571–610. https://doi.org/10.2307/258788 Surroca J, Tribó J, Waddock S (2010) Corporate Responsibility and Financial Performance: the role of Intangible Resources. Strateg Manage J 31: 463–490. https://doi.org/10.1002/smj.820 Testa M, D’Amato A (2017) Corporate environmental responsibility and financial performance: Does bidirectional causality work? Empirical evidence from the manufacturing industry. Soc Responsib J 13: 221–234. https://doi.org/10.1108/SRJ-02-2016-0031 Tzouvanas P, Kizys R, Chatziantoniou I, et al (2020) Environmental and financial performance in the European manufacturing sector: An analysis of extreme tail dependency. Br Account Re 52: 100863. https://doi.org/10.1016/j.bar.2019.100863 Truong Y, Mazloomi H, Berrone P (2021) Understanding the impact of symbolic and substantive environmental actions on organizational reputation. Ind Mark Manag 92: 307–320. https://doi.org/10.1016/j.indmarman.2020.05.006 Tsai KH, Huang CT, Chen ZH (2020) Understanding variation in the relationship between environmental management practices and firm performance across studies: A meta‐analytic review. Bus Strategy Environ 29: 547–565. https://doi.org/10.1002/bse.2386 Turkcan H (2025) How to improve financial performance through sustainable manufacturing practices? The roles of green product innovation and digital transformation. J Manuf Technol Manag 36: 577–596. https://doi.org/10.1108/JMTM-03-2024-0112 Velte P (2016) Sustainable management compensation and ESG performance–the German case. Probl Perspect Manag 14: 17–24. http://dx.doi.org/10.21511/ppm.14(4).2016.02 Waddock SA, Graves SB (1997) The corporate social performance-financial performance link. Strateg Manage J 8: 303–319. Available from: http://www.jstor.org/stable/3088143 Waldman DA, de Luque MS, Washburn N, et al. (2006) Cultural and leadership predictors of corporate social responsibility values of top management: a GLOBE study of 15 countries. J Int Bus Stud 37: 823–837. https://doi.org/10.1057/palgrave.jibs.8400230 Welford R (2005) Corporate Social Responsibility in Europe, North America and Asia. J Corp Cit 17: 33–52. https://doi.org/10.9774/GLEAF.4700.2004.sp.00007 Wong KKK (2016) Mediation analysis, categorical moderation analysis, and higher-order constructs modeling in partial least squares structural equation modeling PLS-SEM. Mark Bull 26: 1–22. Wu M, Xie D (2024). The impact of ESG performance on the credit risk of listed companies in Shanghai and Shenzhen stock exchanges. Green Financ 6: 199–218. https://doi.org/10.3934/GF.2024008 Zhang S, Wang Z, Zhao X (2019) Effects of proactive environmental strategy on environmental performance: mediation and moderation analyses. J Clean Prod 235: 1438–1449. https://doi.org/10.1016/j.jclepro.2019.06.220 © 2025 the Author(s), licensee AIMS Press. This is an open access article distributed under the terms of the Creative Commons Attribution License (https://creativecommons.org/licenses/by/4.0)