FinTech Adoption and ESG Performance in MENA Banks: The Mediating Role of Corruption Risk

FinTech adoption is increasingly viewed as a catalyst for sustainable finance, yet empirical evidence on how and under what conditions it enhances environmental, social, and governance (ESG) performance remains mixed, particularly in emerging economies. This study examines the relationship between FinTech adoption and ESG performance in MENA banks, explicitly modeling corruption risk as an internal governance transmission channel. Using a panel of 152 listed banks across 11 MENA countries over the period 2013–2023 and a novel bank-level FinTech Adoption Index constructed through textual analysis of annual reports, we employ fixed-effects and dynamic System GMM estimations to examine both direct and indirect effects. The results show that FinTech adoption is positively associated with ESG performance. More importantly, corruption risk partially mediates this relationship, indicating that FinTech enhances sustainability outcomes not only through improved disclosure and transparency, but also by strengthening internal governance and constraining integrity-related risks. The indirect effect is economically meaningful, underscoring the role of digital governance mechanisms in institutionally constrained settings. Pillar-level analysis reveals stronger effects for the governance and social dimensions, while environmental effects are comparatively weaker. Additional robustness analyses confirm the persistence of these findings across institutional settings and crisis periods. These findings contribute to the FinTech–ESG literature by identifying corruption risk as a key governance mechanism and provide policy-relevant insights for regulators and banks seeking to leverage digital transformation to achieve substantive sustainability outcomes in emerging banking systems.