Saving the Environment in Emerging Markets: The Synergistic Roles of Corporate Ownership Structure, Financing Strategy, and Innovation Capacity

Abstract

As global environmental challenges intensify and stakeholder pressure mounts, the imperative for companies, particularly in emerging markets, to adopt sustainable practices has become increasingly critical. Addressing a gap in the literature, this study examines the impact of ownership structure (OS) and financing strategy (FS) on environmental footprint disclosure (EFD) among energy sector firms in the Middle East and North Africa (MENA) region, while also considering the moderating role of innovation capacity. Drawing on the resource-based view, signaling, and stakeholder theories, this study analyzes panel data from 384 firms spanning 2010 to 2023. To address potential endogeneity issues, the study employs the difference GMM modeling to mititgate endogeneity issues. Additionally, the MMQR approach is applied to capture heterogeneous effects across varying levels of EFD practices. The findings reveal that concentrated and state ownership significantly enhance EFD, while managerial ownership exerts a negative influence. Firms relying on equity financing demonstrate higher EFD levels compared to those relying on debt. Moreover, innovation capacity not only directly impacts EFD but also amplifies the influence of OS and FS on EFD. Notably, the findings remain robust after employing various econometric techniques, including DiD, 2SLS, DCCE, and PSM. These results suggest that encouraging concentrated and state ownership, alongside equity financing, can drive improved environmental transparency within MENA firms. This study underscores the strategic role of innovation in strengthening EFD, offering valuable guidance for policymakers and industry leaders on ownership and financing decisions to foster sustainable development and enhance environmental responsibility.