Impact of digital transformation on performance of environment, social, and governance: Empirical evidence from China

Abstract This research empirically investigates the static and dynamic impacts of firms' digital transformation on environmental, social, and governance (ESG) performance by employing data of listed Chinese companies from 2011 to 2020 via estimations of propensity score matching and difference in differences. First, we find that digital transformation does some good to improve firms' ESG, which is confirmed after conducting several robustness tests. Second, digital transformation benefits the three aspects of ESG (environmental performance, social responsibility, and governance), and its impact is dynamic, promote ESG two years after the digital reform. Third, the impact of digital transformation on ESG is not constant among different firms. Specifically, digital transformation's impact on ESG is stronger among firms located in western or central regions of China and to those in polluting and competitive industries, as well as among non‐stated‐owned enterprises.