How effective is digital transformation? Heterogeneous insights from listed companies’ ESG performance

The study empirically examines the impact of firm digital transformation (DT) on the performance of Chinese-listed enterprises in the areas of environmental, social, and governance (ESG) from 2013 to 2022. We utilized OLS, IV 2SLS causal mediating effect, and moderating effect models to analyze the linkages and deep mechanisms between corporate DT and ESG performance. The empirical findings demonstrate that (i) DT has an effectively positive effect on the performance of firms’ ESG; (ii) DT enhances firms’ ESG performance by enhancing information transparency (TRANS), fostering green innovation (Green), and strengthening internal control (Inter) mechanisms; moreover, (iii) According to the study, common institutional ownership (CIO) effectively facilitates the positive effects of the DT impact on the ESG performance of listed enterprises, and firms’ subjective perception of economic policy uncertainty (SEPU) negatively influences the effect of digital change on firms’ ESG performance; (iv) the impact of DT on ESG performance is more significant in the listed companies of western region and state-owned enterprises. Our findings provide valuable insights into whether and how DT affects the firms’ ESG performance, providing practical recommendations for corporate managers and government decision-making agencies.