Governance as an institutional amplifier: Fintech–ESG interactions and digital economic efficiency in selected advanced and emerging countries

The convergence of digital financial innovation and sustainability governance is a fundamental element of 21st-century economies, but its aggregate productive effects are unknown. Fintech adoption and ESG integration are extensively pursued as discrete policy goals despite theoretical evidence that their interplay conditioned by institutional quality may deliver efficiency improvements that neither channel alone can. Cross-country research has not verified the causal direction of the Fintech–efficiency relationship or found the governance channel through which ESG integration transmits macroeconomic productivity effects. This study addresses both gaps using a balanced panel of 68 countries over 2010–2022. Employing second-generation panel unit root tests, Westerlund cointegration, and fully modified and dynamic OLS estimators to establish long-run relationships, the study applies the Dumitrescu–Hurlin heterogeneous causality framework to identify causal direction and deploys Baron–Kenny panel mediation and interaction-term moderation analysis to decompose the institutional transmission mechanism. Fintech development exerts a positive, unidirectional, and Granger-causal long-run effect on digital economic efficiency (β ≈ 0.18), with no evidence of reverse causality. ESG integration mediates 40.8% of this relationship confirming a previously undocumented governance transmission channel while institutional quality amplifies both the Fintech and ESG efficiency returns by 77% and 72%, respectively, at high-governance relative to low-governance environments. Bidirectional causality between Fintech and ESG establishes a self-reinforcing co-evolutionary dynamic that compounds over time. These findings imply that governance investment is the highest-yield component of any digital economy strategy, and that joint Fintech–ESG co-financing architectures, differentiated by economy type, will outperform siloed policy approaches.