Keywords
corporate digital transformation
ESG performance
Chinese firms
Abstract
This study focuses on Chinese listed companies, aiming to explore the relationship between digital finance, corporate digital transformation, and ESG performance, and further analyze the mediating role of digital transformation in this process. Based on data from Chinese Shanghai and Shenzhen A-share listed companies between 2012 and 2022, this study uses ESG performance data published by the Huazheng ESG Rating and the digital financial index from Peking University. To empirically test how digital finance would impact corporate ESG performance, this study uses the panel data model with two-way fixed effects. This study addresses endogeneity issues by employing lagged one-period ESG data for robustness checks and replacing the core explanatory and dependent variables to ensure the robustness of the conclusions. Additionally, a heterogeneity analysis is performed based on ownership type (state-owned vs. non-state-owned) and regional location (eastern, central, western). The findings indicate that: (1) the development of digital finance significantly contributes to improving corporate ESG performance, and the conclusion remains robust even after considering endogeneity and replacing variables; (2) mechanism analysis reveals that digital transformation is an important mediating variable through which digital finance affects corporate ESG performance; (3) heterogeneity analysis shows that digital finance has a more significant effect on the ESG performance of state-owned enterprises, possibly due to their advantages in resource acquisition and policy support. Additionally, digital finance has a stronger impact on enhancing ESG performance in the central and western regions of China compared to the eastern region.
References
Friede, G., Busch, T., & Bassen, A. (2015). ESG and financial performance: aggregated evidence from more than 2000 empirical studies. Journal of Sustainable Finance & Investment, 5(4), 210–233.
Weston, P., & Nnadi, M. (2023). Evaluation of strategic and financial variables of corporate sustainability and ESG policies on corporate finance performance. Journal of Sustainable Finance & Investment, 13(2), 1058–1074.
National Congress of the Communist Party of China. (2022). Full text of the report to the 20th National Congress of the Communist Party of China. http://english.www.gov.cn/atts/stream/files/6357d404c6d028997c37ca9b
Ren, X., Zeng, G., & Zhao, Y. (2023). Digital finance and corporate ESG performance: Empirical evidence from listed companies in China. Pacific-Basin Finance Journal, 79, 102019.
Su, X., Wang, S., & Li, F. (2023). The impact of digital transformation on ESG performance based on the mediating effect of dynamic capabilities. Sustainability, 15(18), 13506.
Dalal, K. K., & Thaker, N. (2019). ESG and corporate financial performance: A panel study of Indian companies. IUP Journal of Corporate Governance, 18(1), 44–59.
Li, W., Shi, C., Xiao, Z., & Zhang, X. (2024). Bridging the green gap: How digital financial inclusion affects corporate ESG greenwashing. Finance Research Letters, 69, 106018.
SynTao Green Finance. (2024). Rising tide: an overview of China A-share ESG performance 2024. https://syntaogf.com/products/asesg2024/?do_action=action.products_download&Path=0&ProId=159
ChinaIRN.com. (2024). Annual research and consultation report of panorama survey and investment strategy on China industry 2024–2029. https://www.chinairn.com/scfx/20240828/084409448.shtml
Guo, B., Feng, Y., & Lin, J. (2023). Digital inclusive finance and digital transformation of enterprises. Finance Research Letters, 57, 104270.
Li, W., & Pang, W. (2023). The impact of digital inclusive finance on corporate ESG performance: based on the perspective of corporate green technology innovation. Environmental Science and Pollution Research, 30(24), 65314–65327.
China Academy of Information and Communications Technology. (2024). Research report on China’s digital economic development 2024. http://www.caict.ac.cn/kxyj/qwfb/bps/202408/P020240830315324580655.pdf
Accenture. (2023). The 2023 Accenture China Enterprise Digital Transformation Survey. https://www.accenture.com/content/dam/accenture/final/accenture-com/document-2/Reinvent-for-Growth-Accenture-China-Digital-Transformation-Index-2023-CN.pdf
Liu, X., Wang, X., & Yu, W. (2023). Opportunity or challenge? Research on the influence of digital finance on digital transformation of agribusiness. Sustainability, 15(2), 1072.
Zhao, X., & Cai, L. (2023). Digital transformation and corporate ESG: Evidence from China. Finance Research Letters, 58, 104310.
Velte, P. (2016). Women on management board and ESG performance. Journal of Global Responsibility, 7(1), 98–109.
Qian, T., & Yang, C. (2023). State-owned equity participation and corporations’ ESG performance in China: The mediating role of top management incentives. Sustainability, 15(15), 11507.
Zhai, C., Ding, X., Zhang, X., Jiang, S., Zhang, Y., & Li, C. (2023). Assessing the effects of urban digital infrastructure on corporate Environmental, Social and Governance (ESG) performance: Evidence from the broadband China Policy. Systems, 11(10), 515.
Wang, M., & Zhang, D. (2024). Big Data infrastructure and corporate ESG performance: Evidence from listed Chinese manufacturing companies. Sustainability, 16(12), 5147.
Bilyay-Erdogan, S., Danisman, G. O., & Demir, E. (2024). ESG performance and investment efficiency: The impact of information asymmetry. Journal of International Financial Markets, Institutions and Money, 91, 101919.
Bruna, M. G., Loprevite, S., Raucci, D., Ricca, B., & Rupo, D. (2022). Investigating the marginal impact of ESG results on corporate financial performance. Finance Research Letters, 47, 102828.
Tarmuji, I., Maelah, R., & Tarmuji, N. H. (2016). The impact of environmental, social and governance practices (ESG) on economic performance: Evidence from ESG score. International Journal of Trade, Economics and Finance, 7(3), 67.
Xiong, Z., Liu, J., Yan, F., & Shi, D. (2024). Corporate ESG performance when neighboring the Environmental Protection Agency. Journal of Environmental Management, 349, 119519.
Luo, S. (2022). Digital finance development and the digital transformation of enterprises: based on the perspective of financing constraint and innovation drive. Journal of Mathematics, 2022, 1607020.
Yu, M., & Yan, A. (2022). Can digital finance accelerate the digital transformation of companies? From the perspective of M&A. Sustainability, 14(21), 14281.
Lu, Y., Wang, L., & Zhang, Y. (2022). Does digital financial inclusion matter for firms’ ESG disclosure? Evidence from China. Frontiers in Environmental Science, 10, 1029975.
Mu, W., Liu, K., Tao, Y., & Ye, Y. (2023). Digital finance and corporate ESG. Finance Research Letters, 51, 103426.
Wu, S., & Li, Y. (2023). A study on the impact of digital transformation on corporate ESG performance: The mediating role of green innovation. Sustainability, 15(8), 6568.
Ning, Y., & Zhang, Y. (2023). Does digital finance improve corporate ESG performance? An intermediary role based on financing constraints. Sustainability, 15(13), 10685.
Mo, Y., Che, Y., & Ning, W. (2023). Digital finance promotes corporate ESG performance: Evidence from China. Sustainability, 15(14), 11323.
Wang, H., Li, Y., & He, B. (2024). Spatial spillover effects of digital finance on corporate ESG performance. Sustainability, 16(16), 6987.
Lu, H., & Cheng, Z. (2024). Digital inclusive finance and corporate ESG performance: The moderating role of executives with financial backgrounds. Finance Research Letters, 60, 104858.
Xiang, S., Deng, L., Zhou, Z., & Zhang, Z. (2024). Digital finance, ESG performance, and financial performance in Chinese firm levels: The pathway to sustainability. Sustainability, 16(18), 7976.
Zou, J. (2023). The relationship between corporate financialization and digital finance in the era of digital transformation. Journal of the Knowledge Economy, 1–24.
Zhang, Y., Ge, M., Yang, J., Liu, C., & Chen, X. (2023). Controlling shareholders' equity pledge, digital finance, and corporate digital transformation. International Review of Financial Analysis, 90, 102853.
Zhong, Y., Zhao, H., & Yin, T. (2023). Resource bundling: How does enterprise digital transformation affect enterprise ESG development? Sustainability, 15(2), 1319.
Guo, F., Wang, J., Wang, X., Cheng, Z., Li, Y., & Wang, F. (2021). The Peking University digital financial inclusion index of China (2011–2020). https://www.idf.pku.edu.cn/docs/20210421101507614920.pdf
Rha, J. S., & Lee, H. H. (2022). Research trends in digital transformation in the service sector: a review based on network text analysis. Service Business, 16(1), 77–98.
Wu, F., Hu, H., Lin, H., & Ren, X. (2021). Enterprise digital transformation and capital market performance: empirical evidence from stock liquidity. Journal of Management World, 37(07), 130–144.
This work is licensed under a Creative Commons Attribution 4.0 International License.
Copyright (c) 2026 Song Wu, Raemah Abdullah Hashim