Bridging Digital Finance and ESG Success: The Role of Financing Constraints, Innovation, and Governance

Zhengren Luo (), Pick Schen Yip () and Robert Brooks
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Zhengren Luo: School of Management, Universiti Sains Malaysia, Gelugor 11800, Pulau Pinang, Malaysia
Pick Schen Yip: School of Management, Universiti Sains Malaysia, Gelugor 11800, Pulau Pinang, Malaysia
Robert Brooks: Department of Econometrics and Business Statistics, Monash Business School, Monash University, P.O. Box 197, Melbourne, VIC 3145, Australia

IJFS, 2025, vol. 13, issue 2, 1-24

Abstract: This study investigates the impact of digital finance on corporate ESG performance, using panel data from A-share listed companies on the Shanghai and Shenzhen stock markets between 2011 and 2022. Our findings demonstrate that digital finance significantly enhances corporate ESG outcomes, with financing constraints and digital transformation serving as partial mediators and internal control quality acting as a moderating factor. The results from channel tests indicate that digital finance facilitates notable improvements in social performance and corporate governance, while its influence on environmental performance remains limited. Further analysis reveals that the positive impacts of digital finance on ESG are more evident in small-scale, technology-intensive, and non-polluting firms. This study concludes by proposing tailored recommendations for government, financial institutions, and corporations, emphasizing the need for differentiated policies to elevate ESG practices and promote higher quality, sustainable economic, and social development in China.

Keywords: digital finance; financing constraints; digital transformation; internal control quality; ESG performance (search for similar items in EconPapers)
JEL-codes: F2 F3 F41 F42 G1 G2 G3 (search for similar items in EconPapers)
Date: 2025
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