IDEAS home Printed from https://ideas.repec.org/a/gam/jsusta/v16y2024i18p8274-d1483905.html

The Nonlinear Effects of Digital Finance on Corporate ESG Performance: Evidence from China

Author

Listed:
  • Qingmin Yin

    (Business School, Hohai University, Nanjing 210098, China
    School of Economics and Finance, Hohai University, Nanjing 210098, China)

  • Nan Su

    (Business School, Hohai University, Nanjing 210098, China
    School of Economics and Finance, Hohai University, Nanjing 210098, China)

  • Chenhui Ding

    (Economics and Management School, Dongguan University of Technology, Dongguan 523808, China)

Abstract

Digital finance enhances corporate ESG performance and is essential for achieving sustainable development; however, its consistent effectiveness in improving ESG outcomes remains contested. Using panel data from A-share listed companies on the Shanghai and Shenzhen stock exchanges in China from 2011 to 2021, this study empirically examines nonlinear effects, transmission mechanisms, and moderating factors. The results indicate a U-shaped relationship between digital finance and ESG performance, with a positive impact becoming apparent when digital finance exceeds the threshold of 3.81. Mechanism tests reveal that green technological innovation and public environmental attention are crucial transmission channels for the nonlinear effects. Furthermore, financial regulation levels and environmental uncertainty negatively moderate this relationship, while corporate digital transformation has a positive moderating effect. Further analysis shows that the U-shaped relationship is more pronounced in areas with lesser financial advancement and higher levels of environmental regulation, as well as in non-high-tech industries, non-manufacturing sectors, smaller firms, and companies without political connections. This study provides empirical evidence and policy insights to support the promotion of financial services that better facilitate corporate sustainability.

Suggested Citation

  • Qingmin Yin & Nan Su & Chenhui Ding, 2024. "The Nonlinear Effects of Digital Finance on Corporate ESG Performance: Evidence from China," Sustainability, MDPI, vol. 16(18), pages 1-27, September.
    • Handle: RePEc:gam:jsusta:v:16:y:2024:i:18:p:8274-:d:1483905
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/2071-1050/16/18/8274/pdf
    Download Restriction: no
    File URL: https://www.mdpi.com/2071-1050/16/18/8274/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Adhikari, Binay K. & Agrawal, Anup, 2018. "Peer influence on payout policies," Journal of Corporate Finance, Elsevier, vol. 48(C), pages 615-637.
    2. Yang Lyu & Zheng Ji & Xiaoqi Zhang & Zhe Zhan, 2023. "Can Fintech Alleviate the Financing Constraints of Enterprises?—Evidence from the Chinese Securities Market," Sustainability, MDPI, vol. 15(5), pages 1-21, February.
    3. Aabo, Tom & Giorici, Iasmina Cristina, 2023. "Do female CEOs matter for ESG scores?," Global Finance Journal, Elsevier, vol. 56(C).
    4. Richard F. J. Haans & Constant Pieters & Zi-Lin He, 2016. "Thinking about U: Theorizing and testing U- and inverted U-shaped relationships in strategy research," Strategic Management Journal, Wiley Blackwell, vol. 37(7), pages 1177-1195, July.
    5. Hans-Werner Sinn, 2008. "Public policies against global warming: a supply side approach," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 15(4), pages 360-394, August.
    6. Riccardo Torelli & Federica Balluchi & Arianna Lazzini, 2020. "Greenwashing and environmental communication: Effects on stakeholders' perceptions," Business Strategy and the Environment, Wiley Blackwell, vol. 29(2), pages 407-421, February.
    7. Borui Guo & Xiaoxia Huang, 2023. "Role of Digital Transformation on Carbon Performance: Evidence from Firm-Level Analysis in China," Sustainability, MDPI, vol. 15(18), pages 1-18, September.
    8. Valérie Revest & Alessandro Sapio, 2012. "Financing technology-based small firms in Europe: what do we know?," Small Business Economics, Springer, vol. 39(1), pages 179-205, July.
    9. Miriam Bruhn & Inessa Love, 2014. "The Real Impact of Improved Access to Finance: Evidence from Mexico," Journal of Finance, American Finance Association, vol. 69(3), pages 1347-1376, June.
    10. Ying Yu & Qian Zhang & Fan Song, 2023. "Non-Linear Impacts and Spatial Spillover of Digital Finance on Green Total Factor Productivity: An Empirical Study of Smart Cities in China," Sustainability, MDPI, vol. 15(12), pages 1-22, June.
    11. Steen Vallentin, 2015. "Governmentalities of CSR: Danish Government Policy as a Reflection of Political Difference," Journal of Business Ethics, Springer, vol. 127(1), pages 33-47, March.
    12. repec:dau:papers:123456789/10972 is not listed on IDEAS
    13. Purva Khera & Miss Stephanie Y Ng & Ms. Sumiko Ogawa & Ms. Ratna Sahay, 2021. "Is Digital Financial Inclusion Unlocking Growth?," IMF Working Papers 2021/167, International Monetary Fund.
    14. Ren, Xiaohang & Zeng, Gudian & Zhao, Yang, 2023. "Digital finance and corporate ESG performance: Empirical evidence from listed companies in China," Pacific-Basin Finance Journal, Elsevier, vol. 79(C).
    15. Panos Constantinides & Ola Henfridsson & Geoffrey G. Parker, 2018. "Introduction—Platforms and Infrastructures in the Digital Age," Information Systems Research, INFORMS, vol. 29(2), pages 381-400, June.
    16. Yan Li & Lin Wang, 2021. "Correction to: Inclusive Finance in China," Springer Books, in: Yan Li & Lin Wang (ed.), Inclusive Finance in China, chapter 11, pages C1-C1, Springer.
    17. Huang, Qiping & Li, Yongjia & Lin, Meimei & McBrayer, Garrett A., 2022. "Natural disasters, risk salience, and corporate ESG disclosure," Journal of Corporate Finance, Elsevier, vol. 72(C).
    18. David, Kuo Chuen LEE & Joseph LIM & Kok Fai PHOON & Yu WANG, 2021. "Fintech and Financial Inclusion," World Scientific Book Chapters, in: David Kuo Chuen Lee & Joseph Lim & Kok Fai Phoon & Yu Wang (ed.), Foundations for Fintech, chapter 13, pages 243-260, World Scientific Publishing Co. Pte. Ltd..
    19. Deng, Jiapin & Liu, Yanchu, 2022. "Does digital finance reduce the employment in the finance industry? Evidence from China," Finance Research Letters, Elsevier, vol. 48(C).
    20. Xingqiang Du, 2015. "How the Market Values Greenwashing? Evidence from China," Journal of Business Ethics, Springer, vol. 128(3), pages 547-574, May.
    21. Ahluwalia, Saurabh & Mahto, Raj V. & Guerrero, Maribel, 2020. "Blockchain technology and startup financing: A transaction cost economics perspective," Technological Forecasting and Social Change, Elsevier, vol. 151(C).
    22. Xiuyun Yang & Qi Han, 2024. "Nonlinear effects of enterprise digital transformation on environmental, social and governance (ESG) performance: evidence from China," Sustainability Accounting, Management and Policy Journal, Emerald Group Publishing Limited, vol. 15(2), pages 355-381, January.
    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. Audi, Marc & Ahmad, Khalil & Poulin, Marc & Ali, Amjad, 2025. "From Globalization to Innovation: Investigating the impact of R&D, Internet Penetration, and Economic Factors on Digitalization in BRICS," MPRA Paper 124396, University Library of Munich, Germany.
    2. Chen, Yuhang & Zhong, Yilin & Xu, Feng & Zhang, Qinghua, 2025. "Driving environmental, social, and governance excellence: The direct and indirect effects of intelligent transformation," Structural Change and Economic Dynamics, Elsevier, vol. 75(C), pages 313-331.
    3. Joana Cobbinah & Abednego Osei & Joseph Owusu Amoah, 2026. "Innovating for a Greener Future: Do Digital Transformation and Innovation Capacity Drive Enterprise Green Total Factor Productivity in the Knowledge Economy?," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 17(1), pages 325-363, February.
    4. Zhang, Wenwen & Fu, Shuai & Chiu, Yi-Bin & Hsiao, Cody Yu-Ling, 2025. "Artificial intelligence, digital inclusive finance, and financial performance: Dynamic threshold insights from renewable energy enterprises," Energy Economics, Elsevier, vol. 148(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. Wei Li & Weining Li & Veikko Seppänen & Timo Koivumäki, 2022. "How and when does perceived greenwashing affect employees' job performance? Evidence from China," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 29(5), pages 1722-1735, September.
    2. Ren, Xiaohang & Zeng, Gudian & Zhao, Yang, 2023. "Digital finance and corporate ESG performance: Empirical evidence from listed companies in China," Pacific-Basin Finance Journal, Elsevier, vol. 79(C).
    3. Liu, Jing-Yue & Lei, Quan & Li, Ruojin & Zhang, Yue-Jun, 2024. "Resistance or motivation? Impact of climate risk on corporate greenwashing: An empirical study of Chinese enterprises," Global Finance Journal, Elsevier, vol. 62(C).
    4. Wang, Yuxi & Hu, Fangjia & Wang, Yunyun, 2024. "Analyst coverage and greenwashing: Evidence from Chinese A-Share listed corporations," International Review of Economics & Finance, Elsevier, vol. 94(C).
    5. Wang, Zhen & Chu, Erming & Hao, Yukai, 2024. "Towards sustainable development: How does ESG performance promotes corporate green transformation," International Review of Financial Analysis, Elsevier, vol. 91(C).
    6. Yue, Sishi & Yang, Mo & Cao, Jiawei & Yang, Jinyu, 2025. "Do management climate change concerns mitigate greenwashing? Evidence from China," Emerging Markets Review, Elsevier, vol. 67(C).
    7. Wu, Xinmei & Wu, Xinhong & Shang, Duo & Fan, Libo, 2025. "Digital transformation and firm business diversification: An inverse U-shaped relationship," Economic Analysis and Policy, Elsevier, vol. 87(C), pages 874-892.
    8. Zhang, Cheng & Yu, JiaQi & Bai, Yiyi & Ho, Kung-Cheng, 2024. "The impact of CEO's green experience on digital transformation," Pacific-Basin Finance Journal, Elsevier, vol. 85(C).
    9. Zhengyong Zhang & Jiayi You, 2024. "Does firms' ESG information disclosure have contagion effect? Evidence from China," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 31(4), pages 3274-3296, July.
    10. Duan, Dingkang & Wei, Ran & Wang, Chao & Xia, Bingyu, 2025. "Opportunity or obstacle? Climate risk disclosure and corporate ESG performance," International Review of Economics & Finance, Elsevier, vol. 100(C).
    11. Wei Li & Weining Li & Veikko Seppänen & Timo Koivumäki, 2023. "Effects of greenwashing on financial performance: Moderation through local environmental regulation and media coverage," Business Strategy and the Environment, Wiley Blackwell, vol. 32(1), pages 820-841, January.
    12. Zhou, Zhongsheng & Yuan, Zhichao & He, Chao, 2025. "Can digital transformation promote firms' sustainable development? Evidence based on ESG performance," International Review of Financial Analysis, Elsevier, vol. 105(C).
    13. Dejan Glavas & Gilles Grolleau & Naoufel Mzoughi, 2023. "Greening the greenwashers – How to push greenwashers towards more sustainable trajectories," Post-Print hal-03908838, HAL.
    14. Xing, Chao & Zhang, Xinyue & Zhang, Yuming & Zhang, Luxiu, 2024. "From green-washing to innovation-washing: Environmental information intangibility and corporate green innovation in China," International Review of Economics & Finance, Elsevier, vol. 93(PB), pages 204-226.
    15. Liu, Qiongzhi & Li, Renke & Wang, Yuqin, 2024. "Digital finance and capital mobility: Evidence from cross-regional investment of listed companies in China," Pacific-Basin Finance Journal, Elsevier, vol. 87(C).
    16. Tian, Lichuan & Sun, Kai & Yang, Jie & Zhao, Yang, 2024. "Does digital economy affect corporate ESG performance? New insights from China," International Review of Economics & Finance, Elsevier, vol. 93(PB), pages 964-980.
    17. Xuhui Peng & Jingduan Li & Qingliang Tang & Yi‐Chen Lan & Xinjian Cui, 2024. "Do environmental scores become multinational corporations' strategic “greenwashing” tool for window‐dressing carbon reduction? A cross‐cultural analysis," Business Strategy and the Environment, Wiley Blackwell, vol. 33(3), pages 2084-2115, March.
    18. Feng, Chao & Wang, Ying & Cheng, Xi, 2025. "Local governmental environmental responsibility and corporate greenwashing: Quasi-experimental evidence from China," Journal of Asian Economics, Elsevier, vol. 100(C).
    19. Mu, Weiwei & Liu, Kefu & Tao, Yunqing & Ye, Yongwei, 2023. "Digital finance and corporate ESG," Finance Research Letters, Elsevier, vol. 51(C).
    20. Teti, Emanuele & Etro, Leonardo L. & Pausini, Lorenzo, 2024. "Does greenwashing affect Company's stock Price? Evidence from Europe," International Review of Financial Analysis, Elsevier, vol. 93(C).

    More about this item

    Keywords

    ;
    ;
    ;
    ;

    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:gam:jsusta:v:16:y:2024:i:18:p:8274-:d:1483905. 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: MDPI Indexing Manager (email available below). General contact details of provider: https://www.mdpi.com .

    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.