Does digital economy affect corporate ESG performance? New insights from China

Abstract

With the explosive development and innovation of digital and information technologies, a big data era has arrived in China. We examine the influence of the digital economy on corporate ESG performance using panel data from A-share listed firms in China between 2011 and 2021. First, we find that the digital economy can significantly improve corporate ESG performance, especially in environmental and governance dimensions. Second, our mechanism analysis identifies two channels—green innovation and digital transformation—through which the digital economy affects corporate ESG performance. Third, our cross-sectional analysis shows that the effect of the digital economy on corporate ESG performance is more pronounced for listed firms located in areas with lower economic levels, facing higher financing constraints, and belonging to high-polluting industries. Finally, our results remain robust after conducting a series of tests. Our study underscores the policy implication that embracing and promoting digital economy initiatives can serve as a potent lever to enhance corporate ESG performance, particularly in environmental and governance dimensions.