The Effect of Environmental Innovation on Firm Value

This study aims to empirically analyze the impact of environmental innovation activities on firm value. The findings may offer insights into how companies and regulators should approach the rapidly changing environmental landscape. For this research, data on the environmental innovation activities of publicly listed manufacturing firms in Korea were gathered through the KIS survey conducted by STEPI, covering the period from 2019 to 2021. Financial data for these firms were obtained from FnGuide’s Data Guide5. A total of 1,345 firm-year observations were analyzed using the firm clustering regression model. The results indicate that firms engaging more intensively in environmental innovation tend to experience a decline in firm value. Environmental innovations that benefit the firm itself do not significantly affect its firm value, while those that benefit end-users tend to have a negative impact. Additionally, when environmental innovation is driven by regulatory compliance, firm value decreases under low regulatory pressure but remains unaffected under high pressure. In contrast, when environmental innovation is pursued for strategic purposes, it negatively impacts firm value if the strategic importance is low but positively affects firm value when the strategic importance is high.