Discipline or pressure?The impact of peer digital subsidies on corporate digital washing in CIO networks

The peer digital subsidies in common institutional ownership (CIO) networks may have dual effects on digital washing. On the one hand, they enhance the affordance of benchmarking governance by reducing information asymmetry between CIOs and firms, thereby helping to discipline digital washing. On the other hand, they exert competitive pressure on managers, which may weaken or even reverse the effectiveness of CIO governance and thereby encourage digital washing. This study empirically examines these two opposing possibilities using data from Chinese A-share listed firms from 2012 to 2023. The results indicate that both the presence and the average level of peer digital subsidies are significantly associated with lower levels of corporate digital washing, suggesting that the disciplinary effect dominates the pressure effect. We further show that higher corporate technological similarity strengthens this negative relationship. Moreover, the disciplinary effect of peer firms emerges only when peers direct their digital subsidies toward substantive rather than symbolic digital transformation. Heterogeneity tests indicate that the suppressive effect of peer digital subsidies on digital washing is more pronounced among firms with low R&D investment, high stock liquidity, low government digital attention, and low managerial myopia.