The Impact Of Green Innovation On Corporate Financial Performance

As the times progress,China’s economy is shifting from high growth to high quality development,and achieving low-carbon,environmentally friendly and sustainable development has become a top priority.As the concept of low carbon and environmental protection continues to grow,all levels of society,including governments,enterprises,social groups and individuals,are increasingly concerned about the green transformation of lifestyles and production methods.For heavily polluting enterprises,it is imperative to reduce environmental costs through green innovation to achieve "harmonious co-existence".However,the huge investment in research and development(R&D)and the uncertainty of R&D revenues are not in line with the traditional economic goal of profit maximisation,so it is important to understand the impact of green innovation on the financial performance of enterprises.The relationship between the two is not only about the motivation of enterprises to innovate,but also about the direction and ways to promote green development in the next step.The cognitive and behavioural characteristics of executives,who are central to corporate decision-making and management,have significant effects on both green innovation performance and financial performance,but no definite conclusions have been drawn about the mechanisms of influence between the three.Based on Schumpeter’s innovation theory,Porter’s hypothesis,stakeholder theory,top echelon theory,social identity theory and information decision theory,this paper investigates the impact of green innovation on financial performance of 593 heavy polluters in A-share companies from 2011-2021.size change and membership change as indicators of executive team stability,and two executive characteristics,including executive team fracture zones measured by characteristics such as age and gender,as moderating variables to explore the role of the holistic characteristics of executive teams.Finally,as different types of companies tend to differ in terms of business philosophy and resource allocation,this paper also investigates whether the impact of green innovation on corporate financial performance and the moderating effect of executive team characteristics differ for companies of different ownership nature and size.The study finds that,in terms of the impact of green innovation on financial performance,companies can achieve the goal of improving financial performance through green innovation activities,and achieve their long-term development goals while protecting the natural environment;at the same time,as green innovation has "double externalities",it can bring long-term advantages and competitiveness to the company through building a good social image,etc.,and sustainable development.At the same time,as green innovation has a ’double externality’,it can bring long-term advantages and competitiveness to the company by building a good social image,etc.,and continuously improve the financial performance of the company.In terms of executive team characteristics,the positive relationship between green innovation and financial performance is positively moderated by executive team fracture zones.When firms engage in green innovation,firms with high team fracture zones provide more creative decisions and enhance the positive impact of green innovation on financial performance as information asymmetry is mitigated.In terms of firm type,the enhancing effect of green innovation on financial performance is more pronounced in state-owned enterprises and small-scale firms,while the moderating effect of executive team fracture zones is insignificant in state-owned enterprises due to their inability to exploit their original resource and information advantages,and weakens the effect of green innovation on financial performance in small-scale firms.