The impact of economic policy uncertainty and digital integration on ESG practices in European companies

Imen Ayadi and Jahmane Abderrahman

Research in International Business and Finance, 2025, vol. 76, issue C

Abstract: This study examines the impact of economic policy uncertainty (EPU) and digital integration on corporate environmental, social, and governance (ESG) practices, a critical issue in today's volatile economic landscape. Using a robust econometric approach, we employ a two-stage GMM estimation system and Powell's IV-QRPD panel model to analyze variations across different levels of corporate sustainability. The findings reveal that EPU has a heterogeneous effect on ESG performance: it negatively impacts firms with lower ESG scores while benefiting those with stronger sustainability commitments. Conversely, digital integration plays a crucial role in enhancing ESG practices and mitigating the adverse effects of EPU, fostering long-term resilience and sustainability. These results highlight the importance of corporate investment in digital transformation as a strategic tool for improving ESG performance, particularly in uncertain economic environments. Policymakers should support digital adoption to strengthen corporate sustainability and reduce vulnerability to economic fluctuations.

Keywords: Economic Policy Uncertainty; Digital Integration; ESG Practices; European companies; Sustainability; Resilience (search for similar items in EconPapers)
Date: 2025
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:riibaf:v:76:y:2025:i:c:s0275531925000820

DOI: 10.1016/j.ribaf.2025.102826

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