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

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  • 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
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    Keywords

    digital transformation; audit risk; green transition; energy sector; China; regional heterogeneity; audit firm type;
    All these 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

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