Does ESG Scores Moderate the Impact of FinTech on Investment Efficiency? Insights from Firms in the MENA Region

This paper explores the efficacy of ESG performance in high-tech adoption and investment efficiency in the Middle East and North African (MENA) region. The focus on the MENA region is particularly relevant given the rapid expansion of digital ecosystems in the area, combined with heterogeneous institutional frameworks, where the interaction between sustainability practices and technology adoption remains insufficiently studied. The study seeks to investigate whether ESG scores strengthen the effect of FinTech adoption on both capital allocation and firm performance. Modeling a panel of firm-year observations (n = 4417) for the years 2010–2024, OLS regression, two-stage Heckman models, and 2SLS estimation are used to examine main effects and moderators. Findings show that FinTech adoption positively influences investment efficiency and this effect is stronger among firms with high ESG scores, and ESG scores are a determinant of the efficient investment allocation. The results are also robust to alternative specifications of the model. Theoretically, the study extends our understanding of ESG performance as related to digital transformation in nascent institutional environments. As a matter of practical policy, it offers direction for policymakers and managers in the MENA region to incorporate sustainability within technology adoption policies.