Exploring the governance–digital transformation nexus: empirical evidence on sustainability reporting using 2SLS, LSDV models, heterogeneity effects, and cluster analysis

As businesses face increasing pressure from stakeholders to address environmental challenges, the intersection of corporate governance and digital transformation presents a promising pathway toward sustainable business practices (SBP). This study investigates whether the convergence of these two forces can foster innovation and sustainability, particularly within the complex socio-economic context of the MENA region. Grounded in stakeholder and dynamic capabilities theories, the research examines how CG structures influence SBP, with digital transformation serving as a moderating factor. Using panel data from 462 listed manufacturing firms (2010–2022) and employing advanced econometric techniques, the findings reveal that diversity-related governance variables—such as board expertise, gender, and age diversity—positively influence SBP, while nationality diversity has a negative effect. Structural governance elements, including board interlock, board size, and CEO duality, also enhance SBP, whereas board independence is negatively associated. Digital transformation significantly amplifies the effectiveness of CG mechanisms on SBP, with heterogeneous effects observed across industries and ownership structures. Cluster analysis highlights notable industry-specific differences in governance impacts. These findings support the implementation of context-sensitive, industry-specific policies aimed at strengthening board governance and digital capabilities as strategic levers for sustainable development.