Sustainable Entrepreneurship in the Digital Era: The Role of Digital Financial Capability and Anti‐Money Laundering Compliance

ABSTRACT Although sustainable entrepreneurship (SE) is increasingly recognized as a vital solution to global problems, the influence of financial compliance—specifically, anti‐money laundering (AML) laws on SE remains unexplored. This paper investigates the impact of digital financial capability (DFC) on sustainable entrepreneurship in 100 countries between 2012 and 2022, considering the moderating influence of AML compliance. The study incorporates various factors to develop DFC and SE indices. To address potential endogeneity, heteroscedasticity, and autocorrelation in the data, this study uses the two‐step system generalized method of moments (GMM) approach, which is assessed using Driscoll–Kraay (D–K) regression, to guarantee robust and trustworthy estimates. The findings revealed that countries within the sample, theoretically align with Dynamic Capability Theory regarding the relationship between DFC and SE. Furthermore, the moderating role of AML compliance has a positive impact on the DFC‐SE relationship in advanced countries, increasing it by 20.2%. However, AML laws moderated the adverse effects of DFC on SE in developing countries by 45.8%, driven by variations in regulatory stringency between developed and developing countries. This study closes a significant gap in the literature by incorporating financial compliance into the DFC–SE relationship. These insights help entrepreneurs and financial institutions to optimize costs and promote ethical practices by understanding risk profiles.