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

Author

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  • Wang Juan
  • Khairul Ayuni Mohd Kharuddin
  • Rina Fadhilah Ismail

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.

Suggested Citation

  • Wang Juan & Khairul Ayuni Mohd Kharuddin & Rina Fadhilah Ismail, 2025. "The relationship between firm digital transformation, green transformation and risk taking: A review of the underpinning theories," Edelweiss Applied Science and Technology, Learning Gate, vol. 9(4), pages 2057-2068.
    • Handle: RePEc:ajp:edwast:v:9:y:2025:i:4:p:2057-2068:id:6477
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