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Evaluating Corporate Environmental Performance in the Context of Artificial Intelligence Implementation: The Contingent Roles of Ownership Type and External Monitoring

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  • Shaohui Wang
  • Yanlan Yong
  • Murtaza Hussain
  • Umer Sahil Maqsood
  • R. M. Ammar Zahid

Abstract

Corporate environmental performance (CEP) has emerged as a matter of topmost importance within the business domain, as organizations increasingly acknowledge the exigency of integrating sustainable practices into their core operational frameworks. Drawing from the natural resource‐based view, institutional, stakeholder, and legitimacy theories, this study hypothesizes a positive relationship for the impact of artificial intelligence (AI) on Chinese listed firms' CEP, moderated by the roles of state ownership (SOWN) and external stakeholders, i.e., external auditor (BIG4), financial analysts (FA), and media coverage (MC). The study analyzes a comprehensive dataset of 9033 firm‐year observations from Chinese A‐share listed firms on the Shanghai and Shenzhen stock exchanges over the period 2010–2019. AI is measured through computer‐assisted textual analysis of annual reports, while CEP is quantified using environmental responsibility scores from an independent rating agency (HEXUN‐RKS). Employing fixed effects panel regression models, empirical findings reveal a positive and significant relationship between AI and CEP. The results for moderation effects demonstrate that BIG4 and FA significantly strengthen the positive AI–CEP relationship, but MC does not. Moreover, the study's heterogeneity analyses indicate that the positive impact of AI on CEP is more pronounced in decision‐effective firms and highly competitive industries. Importantly, the main findings of the study were validated through instrumental variables, lag and lead models, two‐step system generalized method of moments, and an alternate proxy for CEP. The study contributes new insights on AI's environmental impacts in emerging economies like China undergoing digital transformation. It highlights how ownership structure and heightened external oversight compel firms to leverage AI for enhancing CEP.

Suggested Citation

  • Shaohui Wang & Yanlan Yong & Murtaza Hussain & Umer Sahil Maqsood & R. M. Ammar Zahid, 2025. "Evaluating Corporate Environmental Performance in the Context of Artificial Intelligence Implementation: The Contingent Roles of Ownership Type and External Monitoring," Business Strategy and the Environment, Wiley Blackwell, vol. 34(4), pages 3957-3981, May.
    • Handle: RePEc:bla:bstrat:v:34:y:2025:i:4:p:3957-3981
    DOI: 10.1002/bse.4179
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