The Impact of Firm Digital Transformation on Environmental, Social, and Governance Performance: Evidence from China

Growing consciousness about sustainability and the onset of the digital era have affected the corporate environmental, social, and governance (ESG) outcomes to the forefront of new debates. This article attempts to use statistical analysis software such as Stata to explore relevant issues. A-share listed firms in Shanghai and Shenzhen between 2006 and 2022 are examined in this research for the sake of exploring how digitalization in businesses affects ESG ratings. Findings suggest a positive correlation between digital initiatives and ESG metrics improvements. These findings are consistent even after multiple robustness checks. Additionally, this article delves into the mechanisms driving this primary relationship, discovering that digital advances in firms enhance ESG scores by easing financial limitations, diminishing information disparities, and bolstering technological innovation. This article further reveals variable impacts based on firm size and geographical location.