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

Articles in Press

Document Type : Research Paper

Authors

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

2 National University of Modern Languages

3 Preston University Islamabad Campus, Pakistan.

4 Multimedia University, Cyberjaya, Malaysia

5 National University of Computer and Emerging Sciences FAST Islamabad

10.22059/ijms.2025.397116.677714

Abstract

In an era marked by growing environmental concerns, this study delves into the nexus between environmental performance and firm performance and the modification of this relationship by 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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Interdisciplinary Journal of Management Studies

Articles in Press, Accepted Manuscript
Available Online from 14 October 2025

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