Green Finance and Sustainable Performance: The Mediating Roles of Green Innovation and Green Capabilities and the Moderating Effect of Stakeholder Pressure

ABSTRACT This study examines the relationship between green finance and sustainable performance, considering the mediating roles of green innovation and green capabilities and the moderating effect of stakeholder pressure. Grounded in dynamic capability and stakeholder theories, data were collected from 227 financial, R&D, and environmental managers in Indonesian banks using a multi‐respondent design and analyzed via covariance‐based structural equation modeling (CB‐SEM). The results show that green finance significantly enhances sustainable performance, both directly and indirectly, by fostering green innovation and green capabilities. Additionally, stakeholder pressure strengthens the effects of green innovation and green capabilities on sustainable performance, highlighting the importance of external expectations in reinforcing sustainability outcomes. This study advances theory by integrating dynamic capability and stakeholder perspectives and offers practical insights for banks and policymakers seeking to promote sustainability through green financing.