How innovation and ownership concentration affect the financial sustainability of energy enterprises: evidence from a transition economy

The energy sector in Vietnam has developed rapidly as the country is transitioning to renewable energy. Moreover, the Vietnamese government also motivates the engagement of private investors in the energy sector to enhance the competitiveness of the energy market. Therefore, this paper investigates how innovation investments and ownership concentration affect the financial sustainability of energy companies in Vietnam. We employ the Fixed Effect Model and Generalized Method of Moments estimations to analyze the sample, including 600 firm-year observations of 103 energy companies from January 2007 to December 2020. The empirical findings show that innovations and block-holders support firms to grow sustainably. The positive relationship between innovation investments and financial sustainability is robust even when we employ alternative proxies of innovation investments. Our study indicates that block-ownership affects sustainable developments of smaller energy firms, while innovation investments significantly improve the sustainability of larger energy firms. Finally, our study reports that the Covid-19 pandemic adversely affects the financial sustainability of energy firms. Our findings align with agency theory, resource-based theory, and prior literature. Our findings recommend that energy firms motivate innovation investments such as training and R&D activities to grow sustainably. In addition, the Vietnamese government should encourage small energy firms to attract blockholders to improve financial sustainability.