Does regularity quality enhance sustainability performance? International evidence

Regulations play an important role in holding companies accountable to society. This study, therefore, examines the relationship between regulatory quality and sustainability performance. We used panel data from 383 financial firms across 12 countries, covering the period from 2012 to 2022. A fixed effects model is employed for the regression analysis. The results indicate that higher regulatory quality enhances a company's sustainability performance, suggesting that stricter regulations encourage firms to engage in sustainable practices. Economically, a one-unit improvement in regulatory quality results in an 18.8 percent increase in sustainability performance. These findings remain consistent after robustness testing and highlight important policy implications. Managers and policymakers can enhance regulatory compliance to promote stable, long-term performance. • This paper examines the relationship between regulatory quality and sustainability performance. • We used panel data from 383 financial firms across 12 countries, covering the period from 2012 to 2022. • A fixed effects model is employed for the regression analysis. • The results indicate that higher regulatory quality enhances a company's sustainability performance. • Managers and policymakers can enhance regulatory compliance to promote stable, long-term performance.