Corporate digital responsibility dividend: Ethical practices and product market performance

With the advancement of digital technologies, corporate digital responsibility (CDR) has become an increasingly salient issue and is gradually reshaping the competitive landscape of product markets. This paper leverages large language models and textual analysis techniques to construct CDR indicator based on news coverage of Chinese A-share listed companies from 2011 to 2024. In addition, we develop an indicator of government digital responsibility regulation using data on administrative penalties across Chinese cities. Drawing on the resource-based view, we examine the impact of CDR on product market performance. Our findings show that CDR significantly enhances product market performance, primarily through mechanisms such as improved product quality control and increased investor trust. Heterogeneity analyses reveal that the market effects of CDR are better among firms with a higher degree of AI adoption, firms for which consumer-facing operations are more important, firms operating in highly competitive industries, and firms located in regions with lower levels of social trust. From the perspective of government-business interaction, we find that government digital responsibility regulation plays an important moderating role. These findings offer important implications for firms in emerging markets aiming to build effective CDR management systems and enhance their competitiveness in product markets.