ENVIRONMENTAL INNOVATION AND FIRM VALUE: THE MODERATING EFFECT OF CORPORATE GOVERNANCE IN EUROPEAN FIRMS
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Date
2025-10-27
Authors
Abeer Yahya
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Publisher
An-Najah National University
Abstract
The purpose of the current study is to investigate the effect of environmental innovation (EI) on firm value among European firms. Furthermore, the moderating effect of corporate governance (CG) on the relationship between EI and firm value is also examined. This study utilized 17,430 company-year observations from firms across 24 European countries for the period 2010–2023. Tobin’s Q was utilized to measure firm value, while the EI and CG were measured by using the EI score and governance score, respectively, retrieved from the LSEG Workspace database (previously known as Refinitiv Eikon database). To achieve the objectives of this study, panel data regression analysis was employed. The empirical findings of this study are consistent with our predictions that the EI positively enhances firm value. Furthermore, the existence of strong CG moderates the relationship between EI and firm value. These results offer a deeper understanding of how European firms implement EI initiatives in the real world and how these initiatives enhance firm value. Efficient CG mechanisms are critical for improving EI initiatives and achieving sustainable development goals. The present study proposes that managers and policymakers should develop more effective EI subsidy programs and environmental systems to incorporate EI initiatives into their operational activities, and direct financial support to technical support and training to ensure that firms have sufficient knowledge and skills to adopt EI initiatives effectively. Moreover, the government and regulators should develop CG mechanisms that consider the importance of adopting EI initiatives to enhance firm value.