Do green innovation and advertising intensity enhance financial performance? Firm-level evidence from the global chemical sector

The transition toward a low-carbon economy has intensified scrutiny on the environmental strategies of carbon-intensive sectors, such as the chemical industry. This paper examines the impact of green innovation on corporate financial performance (CFP), as empirical testing of the NRBV remains limited in such sectors, as well as the moderating role of advertising intensity in this relationship. In this study, advertising intensity refers to a firm's overall advertising expenditure relative to sales, which may include environmental and sustainability-related communication activities used to enhance stakeholder awareness, corporate legitimacy, and the market visibility of green initiatives. Using an unbalanced panel of 105 publicly listed chemical companies from 2015 to 2023, this study examines two dimensions of green innovation, namely, environmental performance-based innovation (EnvPS) and invention-based innovation (IS), and analyses their effects on return on equity (ROE), return on assets (ROA), and return on sales (ROS). The results of the panel regression indicate that the effect of green innovation on CFP is not significant in the short term, indicating a lack of market awareness of sustainability activities and slow returns on innovation. However, advertising intensity introduces a dual interacting role: it amplifies the financial gains associated with EnvPS, while concurrently weakening the profitability effects of IS due to increased short-term cost burdens. This study offers novel empirical evidence on how advertising intensity differentially conditions the relationship between innovation and performance in the global chemical industry, demonstrating that visibility, rather than innovation alone, is critical for converting sustainability investments into financial value.