Corporate digitalization, managerial power distance and corporate sustainability performance: evidence from China

Purpose This study aims to investigate the impact of managerial power distance on the corporate sustainability performance of Chinese firms and to explore the regulatory role of corporate digitalization in the Chinese capital market. Design/methodology/approach The study collects data from 2,632 A-share Chinese non-financial firms listed on Shanghai and Shenzhen stock exchanges during the period from 2010 to 2020. The authors apply different panel data regression techniques (fixed effects, GMM-System) to investigate the impact of managerial power distance on corporate sustainability performance and to explore the regulatory role of corporate digitalization in the Chinese capital market. Findings The results of the study show a positive relationship between high managerial power distance and the sustainability performance of Chinese non-financial firms. This positive relationship is particularly pronounced in Chinese state-owned enterprises (SOEs). The results also show that corporate digitalization increases the sustainability performance of Chinese firms. Further, corporate digitalization weakens the positive relationship between high-power distance and the sustainability performance of Chinese firms. These results are robust to alternate sustainability performance measures and various regression techniques. Originality/value To the best of the authors' knowledge, this is the first study that investigates the regulating impact of corporate digitalization on the relationship between managerial power distance and corporate sustainability performance in China.