IDEAS home Printed from https://ideas.repec.org/a/eee/finlet/v71y2025ics1544612324014740.html

Digital transformation, audit risk, and the low-carbon transition of China's energy enterprises

Author

Listed:
  • Wang, Lu

Abstract

While digital transformation is recognized for driving efficiency and sustainability in China's energy sector, its impact on low-carbon transitions through the lens of audit risk remains underexplored. This study examines how digital transformation, encompassing technologies like AI, IoT, Big Data, and blockchain, affects the low-carbon transition of Chinese energy enterprises, with a specific focus on the mediating role of audit risk. Using data from 2008 to 2022, we find that digital transformation significantly enhances low-carbon transitions. Furthermore, our analysis reveals that audit risk, particularly abnormal expenses, mediates this relationship, with lower audit risk amplifying the positive effects of digital transformation. This underscores the importance of robust audit and risk management practices in ensuring the effectiveness of digital transformation for achieving sustainability goals. Importantly, our findings highlight key heterogeneities in this relationship: the impact of digital transformation varies across regions in China and is influenced by the type of audit firm. This suggests that the Eastern region and firms audited by Non-Big Four firms experience the most significant benefits from digitalization in their pursuit of low-carbon transitions. These insights offer valuable guidance for energy companies and policymakers navigating the complexities of digital innovation and sustainable development in China's energy sector.

Suggested Citation

  • Wang, Lu, 2025. "Digital transformation, audit risk, and the low-carbon transition of China's energy enterprises," Finance Research Letters, Elsevier, vol. 71(C).
    • Handle: RePEc:eee:finlet:v:71:y:2025:i:c:s1544612324014740
    DOI: 10.1016/j.frl.2024.106445
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S1544612324014740
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.frl.2024.106445?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to

    for a different version of it.

    References listed on IDEAS

    as
    1. Chen, Xinmin & Huang, Yuhong & Gao, Yajia, 2024. "Can urban low-carbon transitions promote enterprise digital transformation?," Finance Research Letters, Elsevier, vol. 59(C).
    2. Changli Zeng & Lu Zhang & Jiangtao Li, 2020. "The impact of top management’s environmental responsibility audit on corporate environmental investment: evidence from China," Sustainability Accounting, Management and Policy Journal, Emerald Group Publishing Limited, vol. 11(7), pages 1271-1291, September.
    3. Rafał Trzaska & Adam Sulich & Michał Organa & Jerzy Niemczyk & Bartosz Jasiński, 2021. "Digitalization Business Strategies in Energy Sector: Solving Problems with Uncertainty under Industry 4.0 Conditions," Energies, MDPI, vol. 14(23), pages 1-21, November.
    4. Swen Nadkarni & Reinhard Prügl, 2021. "Digital transformation: a review, synthesis and opportunities for future research," Management Review Quarterly, Springer, vol. 71(2), pages 233-341, April.
    5. Long, Yan & Liu, Liangcan & Yang, Bing, 2024. "The effects of enterprise digital transformation on low-carbon urban development: Empirical evidence from China," Technological Forecasting and Social Change, Elsevier, vol. 201(C).
    6. Jiapeng Dai & Qiao Liang & Eddy Tat Hiung Yap, 2024. "Driving Corporate Sustainable Development: Assessing the Impact of ESG Disclosure on Sustainable Growth," Palgrave Studies in Impact Finance, in: Ahmed Imran Hunjra & John W. Goodell (ed.), The Palgrave Handbook of Green Finance for Sustainable Development, chapter 0, pages 595-616, Palgrave Macmillan.
    7. Changli Zeng & Lu Zhang & Jiangtao Li, 2020. "The impact of top management’s environmental responsibility audit on corporate environmental investment: evidence from China," Sustainability Accounting, Management and Policy Journal, Emerald Group Publishing Limited, vol. 11(7), pages 1271-1291, September.
    8. Sascha Kraus & Paul Jones & Norbert Kailer & Alexandra Weinmann & Nuria Chaparro-Banegas & Norat Roig-Tierno, 2021. "Digital Transformation: An Overview of the Current State of the Art of Research," SAGE Open, , vol. 11(3), pages 21582440211, September.
    9. Belhadi, Amine & Venkatesh, Mani & Kamble, Sachin & Abedin, Mohammad Zoynul, 2024. "Data-driven digital transformation for supply chain carbon neutrality: Insights from cross-sector supply chain," International Journal of Production Economics, Elsevier, vol. 270(C).
    10. Chen, Zan & Jin, Jun & Li, Meng, 2022. "Does media coverage influence firm green innovation? The moderating role of regional environment," Technology in Society, Elsevier, vol. 70(C).
    11. Ma, Shiyu & Gao, Yuguo & Li, Hui, 2024. "Digital economic, resource curse and the development of low-carbon transformation," Resources Policy, Elsevier, vol. 91(C).
    12. Bright Asante-Appiah & Tamara A. Lambert, 2023. "The role of the external auditor in managing environmental, social, and governance (ESG) reputation risk," Review of Accounting Studies, Springer, vol. 28(4), pages 2589-2641, December.
    13. Shang, Yuping & Raza, Syed Ali & Huo, Zhe & Shahzad, Umer & Zhao, Xin, 2023. "Does enterprise digital transformation contribute to the carbon emission reduction? Micro-level evidence from China," International Review of Economics & Finance, Elsevier, vol. 86(C), pages 1-13.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Qihua Yin & Qi Wang & Yumei Fu, 2025. "Digital Transformation and Risk Premium of Audit Fee: Exploring the Mediating Role of Auditor Effort," SAGE Open, , vol. 15(4), pages 21582440251, October.
    2. Zhang, Miao & Dong, Xiaoni & Yin, Xiaoyan & Wang, Chonghong, 2025. "Research on the game of green finance driving corporate digital transformation under the carbon trading mechanism," Finance Research Letters, Elsevier, vol. 85(PE).
    3. Wang, Jiazhen & Han, Youpeng & Long, Huaigang & Zhang, Xinyu, 2025. "Digital intelligence and low-carbon transition risk: Evidence from China," Finance Research Letters, Elsevier, vol. 86(PB).
    4. Basu, Soumyabrata & Bhagawan, Praveen & Mukhopadhyay, Jyoti Prasad, 2025. "Bankruptcy reform and audit fees: Evidence from quasi-natural experiment in India," Finance Research Letters, Elsevier, vol. 81(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Guoxia Wang & Linbo Li, 2025. "Impacts of Enterprise Digital Transformation on Industrial Structure Adjustment—Evidence from China," SAGE Open, , vol. 15(4), pages 21582440251, October.
    2. Japan Huynh, 2025. "Digital Transformation and Bank Liquidity Creation: Evidence From a Bank-Based Market," SAGE Open, , vol. 15(4), pages 21582440251, October.
    3. Adnan Khurshid & Javier Cifuentes‐Faura & Ying Hongbin & Sardar Fawad Saleem, 2025. "Corporate social responsibility in the era of government subsidies: A novel empirical perspective on market competitiveness," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 32(1), pages 102-117, January.
    4. Titov Sergei & Trachuk Arkady & Linder Natalya & RD Pathak & Danny Samson & Zafar Husain & S Sushil, 2023. "Digital transformation enablers in high-tech and low-tech companies: A comparative analysis," Australian Journal of Management, Australian School of Business, vol. 48(4), pages 801-843, November.
    5. Zhang, Yuting & Chin, Tachia & Al-Wazer, Ragwa, 2025. "Good neighbors but bad employers? How corporate digital transformation affects incongruence between external and internal corporate social responsibility," Technological Forecasting and Social Change, Elsevier, vol. 210(C).
    6. Anca Elena Lungu & Mircea Radu Georgescu & Daniel Juravle, 2024. "A Bibliometric Analysis of Digital Entrepreneurship," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 15(4), pages 18617-18645, December.
    7. Claudia Ramona CIOCNITU (STOICONI), 2024. "Digitalization A Necessity For Sustainable Business," Annals of Faculty of Economics, University of Oradea, Faculty of Economics, vol. 33(1), pages 28-35, July.
    8. Xin Tan & Jinfang Jiao & Ming Jiang & Ming Chen & Wenpeng Wang & Yijun Sun, 2024. "Digital Policy, Green Innovation, and Digital-Intelligent Transformation of Companies," Sustainability, MDPI, vol. 16(16), pages 1-23, August.
    9. Maha Shehadeh & Ahmad Almohtaseb & Jehad Aldehayyat & Ibrahim A. Abu-AlSondos, 2023. "Digital Transformation and Competitive Advantage in the Service Sector: A Moderated-Mediation Model," Sustainability, MDPI, vol. 15(3), pages 1-21, January.
    10. Yongxiang Jiao & Fen Xu & Wenjing Ma & Hongen Yang, 2023. "Can Urban Greening Construction Improve the Corporate Preventive Environmental Investment? Evidence from China," Sustainability, MDPI, vol. 15(12), pages 1-17, June.
    11. Junjie Yin & Zhenxing Huang & Jiapeng Liu & WeiWei Li, 2026. "Does the green human capital of top management teams affect corporate environmental protection investment decisions?," Humanities and Social Sciences Communications, Palgrave Macmillan, vol. 13(1), pages 1-23, December.
    12. Siyi Pu & Yitong Ou & Ou Bai, 2025. "Government Public Services and Regional Digital Transformation for Sustainable Development: An Innovation Ecosystem Perspective," Sustainability, MDPI, vol. 17(12), pages 1-19, June.
    13. Torrent-Sellens, Joan, 2024. "Digital transition, data-and-tasks crowd-based economy, and the shared social progress: Unveiling a new political economy from a European perspective," Technology in Society, Elsevier, vol. 79(C).
    14. Koliousis, Ioannis & Al-Surmi, Abdulrahman & Bashiri, Mahdi, 2024. "Artificial intelligence and policy making; can small municipalities enable digital transformation?," International Journal of Production Economics, Elsevier, vol. 274(C).
    15. Chu, Zhongzhu & Zhang, Qiyuan & Tan, Weijie & Chen, Pengyu, 2024. "Assessing the impact of climate policy stringency on corporate energy innovation: Insights from China," Energy Economics, Elsevier, vol. 140(C).
    16. Li, He, 2025. "The effect of digital technology innovation on low carbon investment in renewable energy enterprises," Renewable Energy, Elsevier, vol. 239(C).
    17. Xinyu Li & Bingrui Dong & Shujuan Li & Bangsheng Xie & Luhua Xie, 2025. "Accelerating Green Growth: The Impact of Government Environmental Audits on Urban Green Economy," Sustainability, MDPI, vol. 17(12), pages 1-26, June.
    18. Jinghuai She & Qi Zhang, 2024. "Green innovation and enterprise digital transformation: Escape from the “dilemma” of development and governance choices," PLOS ONE, Public Library of Science, vol. 19(5), pages 1-25, May.
    19. Pooria Jafari & Amy Looy, 2025. "Developing a decision tree to improve a maturity model’s usability: an example for digital work maturity," Information Systems and e-Business Management, Springer, vol. 23(2), pages 539-576, June.
    20. Mishra, Deepa Bhatt & Haider, Imran & Gunasekaran, Angappa & Sakib, Md. Nazmus & Malik, Nishtha & Rana, Nripendra P., 2023. "“Better together”: Right blend of business strategy and digital transformation strategies," International Journal of Production Economics, Elsevier, vol. 266(C).

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;
    ;
    ;

    JEL classification:

    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
    • M42 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Auditing
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:finlet:v:71:y:2025:i:c:s1544612324014740. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/frl .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.