Strategic Governance for Sustainability: The Role of Internal Controls in Shaping Financial Performance Through <scp>ESG</scp> in Emerging Markets

ABSTRACT Amid increasing global emphasis on sustainability, firms are under mounting pressure to align governance mechanisms with environmental, social, and governance (ESG) priorities. This study examines the relationships among internal control quality (ICQ), corporate sustainability (CS), and financial performance (FP) in the Chinese manufacturing sector, emphasizing the moderating role of CS. Using panel data from 226 A‐share listed manufacturing firms between 2017 and 2021, we employ both traditional econometric techniques (OLS and 2SLS) and advanced machine learning methods to enhance analytical depth. Specifically, we utilize causal forest estimation, a generalized random forest (GRF) algorithm, to uncover heterogeneous treatment effects (HTEs) across firms. Our empirical findings reveal three key insights: (1) ICQ significantly enhances CS performance; (2) CS is positively associated with FP; and (3) CS moderates and strengthens the ICQ–FP association. The causal forest results further indicate that these effects vary by firm characteristics such as size, leverage, and age, underscoring the context‐specific nature of governance–sustainability interactions. Theoretically, this study extends stakeholder theory by demonstrating how internal controls act as strategic enablers of sustainable value creation. Practically, it offers guidance for managers and policymakers on how aligning internal controls with sustainability objectives can yield superior financial outcomes, particularly in emerging economies.

Authors

Institutions

Publication Details

Journal
Corporate Social Responsibility and Environmental Management
Published
2026-02-15
DOI
https://doi.org/10.1002/csr.70325
Primary Topic
Corporate Social Responsibility Reporting
Type
article
Field-Weighted Citation Impact
0.00
Controls
|||
ALL TIME
JAN
FEB
MAR
APR
MAY
JUN
JUL
AUG
SEP
OCT
article

Strategic Governance for Sustainability: The Role of Internal Controls in Shaping Financial Performance Through ESG in Emerging Markets

Collins G. Ntim, Maha W. Moustafa, Ahmed A. M. Elamer, Bassam A. Ibrahim et al.
Corporate Social Responsibility and Environmental Management
Corporate Social Responsibility Reporting
article

Strategic Governance for Sustainability: The Role of Internal Controls in Shaping Financial Performance Through ESG in Emerging Markets

Collins G. Ntim, Maha W. Moustafa, Ahmed A. M. Elamer, Bassam A. Ibrahim, Hongyu Guan
article en

Abstract

ABSTRACT Amid increasing global emphasis on sustainability, firms are under mounting pressure to align governance mechanisms with environmental, social, and governance (ESG) priorities. This study examines the relationships among internal control quality (ICQ), corporate sustainability (CS), and financial performance (FP) in the Chinese manufacturing sector, emphasizing the moderating role of CS. Using panel data from 226 A‐share listed manufacturing firms between 2017 and 2021, we employ both traditional econometric techniques (OLS and 2SLS) and advanced machine learning methods to enhance analytical depth. Specifically, we utilize causal forest estimation, a generalized random forest (GRF) algorithm, to uncover heterogeneous treatment effects (HTEs) across firms. Our empirical findings reveal three key insights: (1) ICQ significantly enhances CS performance; (2) CS is positively associated with FP; and (3) CS moderates and strengthens the ICQ–FP association. The causal forest results further indicate that these effects vary by firm characteristics such as size, leverage, and age, underscoring the context‐specific nature of governance–sustainability interactions. Theoretically, this study extends stakeholder theory by demonstrating how internal controls act as strategic enablers of sustainable value creation. Practically, it offers guidance for managers and policymakers on how aligning internal controls with sustainability objectives can yield superior financial outcomes, particularly in emerging economies.

Corporate Social Responsibility and Environmental Management
Alfaisal University (SA), Mansoura University (EG), Imam Mohammad ibn Saud Islamic University (SA), Azerbaijan State University of Economics (AZ), College of Accounting (SI), University of Southampton (GB), Adam Smith Institute (GB), University of Glasgow (GB)
Responsible consumption and production
Openalex Percentile: Top 60%
Corporate Social Responsibility Reporting
AI Navigator

Ask Laika to Summarize, Analyze, and Connect papers live on the map.

Summarize Papers & Methodologies

Extract key findings, datasets, and comparative methods across publications.

Benchmark Rankings & Visual Analytics

Rank top research institutions, authors, funders, topics, and journals by Field-Weighted Citation Impact (FWCI) and paper volume with instant charts.

Connect Distant Disciplines

Bridge topological clusters on the map to find hidden collaborative intersections.