Enhancing Financial Resilience of Manufacturing Companies through Green Innovation and Environmental Governance

Abstract

The transition to a green economy requires manufacturing companies to strengthen environmental strategies without sacrificing financial stability. This study aims to analyze the effect of Green Innovation and Environmental Governance on the Financial Resilience of manufacturing companies and to examine the moderating role of Regulatory Uncertainty on both relationships. Grounded in Stakeholder and Institutional Theory, the study employed a quantitative approach with 184 respondents consisting of financial, operational, production, environmental/ESG, and general managers of manufacturing companies in Indonesia. Data were collected using a five-point Likert-scale questionnaire and analyzed using PLS-SEM through SmartPLS 3, including a two-stage moderation approach. The results demonstrate that Green Innovation and Environmental Governance positively and significantly strengthen Financial Resilience, with green innovation being the dominant predictor. Regulatory Uncertainty significantly weakens the contribution of Green Innovation to Financial Resilience, but does not alter the effect of Environmental Governance, indicating that governance-based mechanisms are relatively more stable under policy volatility. Theoretically, this study extends Stakeholder Theory by positioning financial resilience as an outcome of fulfilling stakeholder environmental demands, and enriches Institutional Theory by identifying regulatory uncertainty as a contingency condition that differentiates the effectiveness of environmental strategies. Practically, the findings encourage managers to integrate green investment evaluation into financial risk management systems, strengthen environmental governance structures, and urge policymakers to establish consistent, transparent, and predictable environmental regulations to support a sustainable green transitio