Balancing Sustainability and Digitalization: How Country FinTech Rank Moderates the ESG –Firm Value Relationship Amid Controversies

Abstract

This paper investigates the impact of ESG performance and ESG washing on firm value within the context of rapidly evolving digital financial systems. Although ESG disclosure has become central to corporate decision‐making, concerns regarding ESG washing have raised doubts about the credibility of reported sustainability practices and their true valuation effects. At the same time, the rise of FinTech development may reshape how markets process and price ESG‐related information, yet this interaction remains underexplored in the literature. Using panel data from global ESG Leaders Index firms between 2018 and 2023, fixed‐effects regression models and industry‐sensitivity robustness checks capture the interplay between ESG, ESG controversies, FinTech development, and firm value. Results show that higher ESG performance and reduced exposure to controversies significantly enhance firm value. Furthermore, country‐level FinTech development strengthens the positive valuation effect of credible ESG performance, indicating that digitally advanced financial ecosystems enhance investors' ability to distinguish between firms with substantive sustainability practices and those engaging in ESG washing. Industry‐sensitive sectors also exhibit stronger ESG–value linkages. For managers, the findings highlight the importance of verifiable ESG practices, particularly in sensitive industries. For policymakers and investors, the study underscores the relevance of FinTech maturity and industry context when assessing ESG disclosure credibility. This study contributes to the literature by examining the ESG washing–value relationship within the broader framework of country‐level FinTech development.