Digital economy and corporate ESG performance: Cost reduction or efficiency improvement?

Yuanyang Liu, Xuemei Tian and Yang Long

Finance Research Letters, 2025, vol. 77, issue C

Abstract: This study uses panel data from 27,698 Chinese firm-year observations (2010–2022) to examine how digital economy development influences corporate environmental, social, and governance (ESG) performance. Through econometric analysis, we find that digital advancement significantly enhances ESG outcomes through direct and indirect mechanisms, namely, reducing agency costs and improving financing efficiency. The impact varies significantly across ownership structures and industrial groups, with stronger effects in nonstate-owned enterprises and nonheavily polluting sectors. These findings remain robust to instrumental variables, propensity score matching, and Heckman correction procedures. The study provides theoretical insights into how digital transformation influences corporate sustainability and practical implications for policy development.

Keywords: Digital economy; ESG performance; Agency cost; Financing efficiency; Corporate sustainability (search for similar items in EconPapers)
JEL-codes: G32 M14 O33 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:77:y:2025:i:c:s1544612325003083

DOI: 10.1016/j.frl.2025.107044

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