Environmental and Financial firm Performance Nexus: Moderating Role of Internal and External Governance Mechanism

Document Type : Research Paper

Authors

1 Research Institute of Economics and Management, Southwestern University of Finance and Economics, Chengdu, China

2 Department Management Science, Faculty of Management Sciences, National University of Modern Languages, Rawalpindi, Pakistam

3 Department of Management Sciences, Preston University Islamabad Campus, Pakistan

4 Multimedia University, Cyberjaya, Malaysia

5 Department of Management Sciences, National University of Computer and Emerging Sciences FAST, Islamabad, Pakistan

Abstract

In an era marked with growing environmental concerns, this study delves into the nexus between environmental performance and firm performance with the moderating role of governance mechanisms in the non-financial sectors of Brazil, Russia, India, China, and South Africa (BRICS). The research employs a Generalized Method of Moments (GMM) by taking data from 176 companies for 11 years (2012-2022). The findings reveal a significant positive influence of environmental performance on business performance, indicating the importance of sustainable practices in enhancing business outcomes. Furthermore, internal governance has an advantageous influence on the environment and firm performance nexus. External governance mechanisms, encompassing government efficiency, political stability, regulation, rule of law, voice and accountability, and control of corruption, also play a crucial role. While these mechanisms partially increase the association between environmental and company performance, some elements show an unfavourable affinity, highlighting challenges in regulatory frameworks and institutional environments. Such results have ramifications for regulators, firms, and financiers, giving perspectives on the significance of adopting ecological sustainability to business management procedures. By understanding the moderating effects of governance mechanisms, organizations can navigate their challenges and capitalize on opportunities presented by environmental initiatives.

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References

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Interdisciplinary Journal of Management Studies
Volume 19, Issue 3
July 2026
Pages 697-712

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