The Role of Big Data in Enhancing Corporate Financial Forecasting and Budgeting: An Empirical Framework with ESG Moderation

Abstract

This paper explores the relationship between the incorporation of Big Data Analytics (BDA) and Environmental, Social, and Governance (ESG) disclosure practices and predicting accuracy in the corporate budgeting process. Using the sample of companies in the United States and the European Union in 2015-2024, our study adopts a hybrid method of a mixed approach that is a combination of econometric models and machine learning. We have found that companies that have more ESG transparent reports and invest more in BDA have much lower forecast errors, especially in unsteady economic state. Besides, the correlation between ESG disclosure and BDA adoption implies a complimentary effect: ESG reporting increases the data richness and stakeholder trust, whereas BDA increases the predictive powers, which in combination increases the strength of budgeting activities. Such model comparison has shown that the machine learning algorithms have better predictive accuracy compared to the traditional econometric methodology, but they both affirm the positive effect of BDA and ESG. These results are the first new evidence that digital transformation and sustainable reporting are the two concepts that increase the success of financial planning through significant implications to the managers, policymakers, and investors. This study is relevant to the literature on corporate digitalization, sustainable finance, and performance management because it emphasizes the strategic importance of integrating BDA and ESG.