Examining The Moderating Effects of the Multinational Corporations' Characteristics on the Link Between Carbon Emissions and Financial Performance

Abstract

This study investigates the moderating effects of firm-specific characteristics on the relationship between carbon emissions reduction strategies and financial performance among North American multinational corporations. Using panel regression models—including Pooled Least Squares (PLS), and Fixed Effects (FE)—the analysis focuses on two key financial indicators: Return on Equity (ROE), and Tobin’s Q. The results reveal that leverage and capital intensity significantly moderate the impact of emissions strategies on ROE, with leverage showing a positive long-term interaction effect (+0.327, p < 0.01) and capital intensity exhibiting a negative long-term effect (–0.106, p < 0.01). ESG score consistently moderates the carbon’s emissions–Tobin’s Q relationship, thereby weakening market valuation responses (FE coefficient = –0.132, p < 0.01). Additionally, the short-term analyses indicate that emissions reduction strategies may reduce Tobin’s Q (OLS coefficient = –0.249, p < 0.01), reflecting initial market skepticism, while simultaneously improving ROE (+0.057, p < 0.01) in the long-run, thereby suggesting internal efficiency gains. Firm size does not significantly moderate these relationships. The findings highlight the nuanced and time-dependent financial effects of sustainability initiatives, emphasizing the need for policymakers and investors to consider firm heterogeneity in evaluating the economic impact of carbon reduction efforts.

Keywords: Finance, Multinational Corporations (MNCs), Moderating Effects, Carbon Emissions, Financial Performance, Sustainability Strategies, and Firm Characteristics

DOI: 10.7176/RJFA/17-1-05

Publication date: February 28^th 2026