The Impact of ESG Performance and Adhocratic Culture on Financial Stability: A JGR-GARCH Modeling Approach Through the Lens of Double Materiality

The modeling of financial volatility incorporating ESG criteria (Environmental, Social, and Governance) through a JGR-GARCH framework makes it possible to assess the influence of sustainability factors on the stability of financial markets, particularly during periods of financial disruption. This dynamic methodological approach captures volatility dynamics and successive shocks in stock prices, thereby providing an accurate measure of conditional volatility. Our findings indicate that a high level of ESG performance, combined with a culture of dynamic value creation, is generally associated with a significant reduction in volatility and improved corporate stability. However, the beneficial effect of this synergy varies across the business cycle. When GDP growth is favorable, the ESG, innovation nexus contributes more strongly to financial stability. This interaction highlights the crucial role of economic expansion phases in shaping the impact of non-financial policies on financial resilience.