The relationship between firm digital transformation, green transformation and risk taking: A review of the underpinning theories

Wang Juan (), Khairul Ayuni Mohd Kharuddin () and Rina Fadhilah Ismail ()

Edelweiss Applied Science and Technology, 2025, vol. 9, issue 4, 2057-2068

Abstract: The growth of the green and digital economy has encouraged businesses to undergo both green and digital transformations. Consistently, research on how risk-taking is affected by a firm's digital and green transformations has grown significantly. This paper analyzes the relevant theories that explain how digital transformation and green transformation affect firm risk-taking. A review of the literature highlighted that agency theory, information asymmetry theory, and resource-based theory are the three main theories used in existing research to explain the relationship between firm digital and green transformations and firm risk-taking. According to agency theory, firm digital transformation and green transformation can alleviate agency problems and promote firm risk-taking. The information asymmetry theory states that digital and green transformation increases a firm's information transmission efficiency, which encourages firm risk-taking. The resource-based theory asserts that digital transformation and green transformation provide firms with effective resources and promote risk-taking. These three theories have examined the relationship between risk-taking, green transformation, and firm digital transformation from various angles, offering concepts and insights into the financial effects of these changes, as well as theoretical support for future studies.

Keywords: Agency theory; Firm digital transformation; Firm green transformation; Firm risk taking; Information asymmetry theory; Resource-based theory. (search for similar items in EconPapers)
Date: 2025
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