Does digital innovation cause better ESG performance? an empirical test of a-listed firms in China

Digital technologies have changed the traditional innovation paradigm. We study the impact of digital innovation on corporate ESG performance using data from China’s A-share listed companies from 2011 to 2021. The results show that (1) digital innovation has a significant and positive impact on ESG performance; (2) digital innovation can improve firm performance and attract the attention of analysts, thereby improving ESG performance; (3) the positive impact of digital innovation on ESG performance is mitigated by corporate financial stability and augmented by institutional investors; and (4) the impact of digital innovation on ESG performance is more pronounced in industries which are nonmanufacturing, industrial digitization, and low-competitive, as well as in firms which are nonstate-owned or enforce executive equity incentives. This study provides a timely assessment of the sustainable value of digital innovation and enriches the research on the impacts of corporate ESG performance.