Digital finance, governance formalization, and green upgrading in Saudi firms: Firm-level evidence from SDG 12 and SDG 13

<ns3:p>Purpose The paper suggests a corporate-governance model of green upgrading where digital finance is the focal explanatory capability, the governance formalization process is the conditioning mechanism, and exporter status and firm size are boundary conditions. Data and measures Using the 2022 World Bank Enterprise Survey for Saudi Arabia (n = 977 complete-case establishments in the context of Vision 2030 and the Saudi Green Initiative), the study measures a Digital Finance Index (DFI) starting with e-payment intensity, formal banking access and digital business visibility, and also a Governance Formalization Index (GFI) originating from external audit, ownership–management separation, certification, foreign ownership, and managerial experience, as well as a binary SDG 12–13 outcome (GreenSDG) covering CO₂ monitoring, energy management, and on-site solar adoption. Methodology Since positive outcomes are rare (weighted prevalence = 1.180%), the analysis uses weighted Firth penalized logistic regression as the main approach along with complementary log-log and ordered-logit model specification for robustness checks and Balanced Random Forest classifier as a predictive corroboration approach. Findings DFI is positively and robustly associated with Greens, supporting H1. The DFI × GFI interaction is positive and significant, which is consistent with the central complementarity hypothesis (H2) as presented in the main specification; GFI shows a significant direct association. Heterogeneity tests partially confirm H3: the firm-size boundary condition works (DFI × Medium β = 4.628;-large-firm subgroup β = 3.171), while the exporter component does not; it has to be remembered, however, that in this sample only 2.184% of the weighted observations come from exporters. Policy implications Findings suggest that the expansion of digital-payment infrastructure ought to be accompanied by audit, certification, and managerial-discipline reforms to ensure that digitalization has an environmental impact through SDG 12 and SDG 13 pathways within the firms.</ns3:p>