Digital Finance, ESG Performance, and Financial Performance in Chinese Firm Levels: The Pathway to Sustainability

Shang Xiang, Lingjie Deng, Zhongbao Zhou and Zhongqingyang Zhang ()
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Shang Xiang: School of Public Administration, Xiangtan University, Xiangtan 411105, China
Lingjie Deng: School of Public Administration, Xiangtan University, Xiangtan 411105, China
Zhongbao Zhou: School of Business Administration, Hunan University, Changsha 410082, China
Zhongqingyang Zhang: School of Public Administration, Xiangtan University, Xiangtan 411105, China

Sustainability, 2024, vol. 16, issue 18, 1-21

Abstract: Given that digital finance is critical for achieving sustainability, this study seeks to probe the mechanisms for using digital finance to solve the triple-bottom-line dilemma of sustainability. This paper examines the inner influence mechanisms of digital finance on ESG (environmental, social, and governance) and financial performance. The results show digital finance is conducive to ESG performance while indirectly enhancing firms’ short- and long-term financial performance via ESG. Further, digital finance usage depth is the primary enabler for ESG and short-term financial performance. The mechanism analysis reveals that the positive relationship between digital finance and ESG will be enhanced by upgrading green innovation and boosting digital transformation. Moreover, heterogeneous analysis states that digital finance usage depth has a more pronounced positive role on ESG and financial performance in large firms and SOEs (state-owned enterprises) while coverage breadth positively affects ESG and is more pronounced in small firms and non-SOEs. This paper expands knowledge about digital finance via sustainability practice pathways.

Keywords: digital finance; ESG performance; financial performance; sustainability; China (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2024
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