FINTECH DEVELOPMENT, DIGITAL INFRASTRUCTURE, AND FINANCIAL INCLUSION ON SUSTAINABILITY ACCOUNTING QUALITY: THE MODERATING ROLE OF INSTITUTIONAL STRENGTH

Abstract

Purpose: This article examines how the development of financial technology (FinTech), the development of the digital infrastructure, and the role of financial inclusion in defining the national sustainability accounting quality in 30 countries between 2015 and 2024, where the institutional strength is proposed as a modulating variable.

Design/Methodology/Approach: The study is based on the EY FinTech Adoption Index, the World Bank's ICT Development Index, the World Bank's Worldwide Governance Indicators (WGI), and an original composite Sustainability Accounting Quality Index, which is created according to the Big 4 audit penetration, the mandatory sustainability audit rates, ISSB adoption preparedness, and the GRI assurance rates, based on the Institutional Theory and the Digital Economy Framework. The main estimation plan is the use of Panel-Corrected Standard Errors (PCSE) and Prais-Winsten regression; the moderation is tested with the help of mean-centered terms of interaction; the sub-sample analysis is considered to check the heterogeneity within the income group.

Findings: It indicate that the development of FinTech and digital infrastructure is a good predictor of the quality of sustainability accounting significantly and positively, though financial inclusion has a significant albeit smaller impact. The institutional strength has a positive moderating role in the three relationships, and the interaction of the two moderators of FinTech and institutional strength has the highest coefficient. The moderating influence is very high in the high-income economies compared to the middle-income economies.

Research limitations/implications: One of the major methodological drawbacks consists of the composite data of the Sustainability Accounting Quality Index, and the possible endogeneity between digital adoption and institutional quality. The adoption strategies towards technology should accompany the institutional reinforcement to realize the full sustainability accounting quality dividend of digital financial development.

Originality/value: This paper introduces the institutional strength as a middleman between FinTech and sustainability accounting relationship in a cross-country macro-panel design as the first paper to formally model the relationship between FinTech and sustainability accounting through institutional quality literatures.