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Bridging Digital Finance and ESG Success: The Role of Financing Constraints, Innovation, and Governance

Author

Listed:
  • Zhengren Luo

    (School of Management, Universiti Sains Malaysia, Gelugor 11800, Pulau Pinang, Malaysia
    School of Economics and Management, Ankang University, Ankang 725000, China)

  • Pick Schen Yip

    (School of Management, Universiti Sains Malaysia, Gelugor 11800, Pulau Pinang, Malaysia)

  • Robert Brooks

    (Department of Econometrics and Business Statistics, Monash Business School, Monash University, P.O. Box 197, Melbourne, VIC 3145, Australia)

Abstract

This study investigates the impact of digital finance on corporate ESG performance, using panel data from A-share listed companies on the Shanghai and Shenzhen stock markets between 2011 and 2022. Our findings demonstrate that digital finance significantly enhances corporate ESG outcomes, with financing constraints and digital transformation serving as partial mediators and internal control quality acting as a moderating factor. The results from channel tests indicate that digital finance facilitates notable improvements in social performance and corporate governance, while its influence on environmental performance remains limited. Further analysis reveals that the positive impacts of digital finance on ESG are more evident in small-scale, technology-intensive, and non-polluting firms. This study concludes by proposing tailored recommendations for government, financial institutions, and corporations, emphasizing the need for differentiated policies to elevate ESG practices and promote higher quality, sustainable economic, and social development in China.

Suggested Citation

  • Zhengren Luo & Pick Schen Yip & Robert Brooks, 2025. "Bridging Digital Finance and ESG Success: The Role of Financing Constraints, Innovation, and Governance," IJFS, MDPI, vol. 13(2), pages 1-24, June.
    • Handle: RePEc:gam:jijfss:v:13:y:2025:i:2:p:109-:d:1674834
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    References listed on IDEAS

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    1. Rongjia Su & Dianjie Liang, 2025. "How Digital Finance Shapes ESG Outcomes: The Mediating Roles of Productivity and Analyst Coverage," Sustainability, MDPI, vol. 17(21), pages 1-18, October.

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