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

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  • Ayadi, Imen
  • Abderrahman, Jahmane

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.

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  • Ayadi, Imen & Abderrahman, Jahmane, 2025. "The impact of economic policy uncertainty and digital integration on ESG practices in European companies," Research in International Business and Finance, Elsevier, vol. 76(C).
    • Handle: RePEc:eee:riibaf:v:76:y:2025:i:c:s0275531925000820
    DOI: 10.1016/j.ribaf.2025.102826
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