Does Digital Transformation Enhance the Sustainability of Enterprises: Evidence from China

In the context of China’s economy being in transition, with the arrival of the digital economy era, it is of great significance to explore the issue of corporate sustainable development from the perspective of digital transformation. This study empirically examines the impact of digital transformation on corporate sustainable development and its mechanism of action with a sample of A-share listed companies in Shanghai and Shenzhen from 2004 to 2021. The findings show that corporate digital transformation can significantly improve their sustainable development and is heterogeneous. Specifically, enterprise digital transformation promotes the sustainable development level of underinvested enterprises more than that of overinvested enterprises and promotes the sustainable development of non-state-owned enterprises more than that of state-owned enterprises; enterprise digital transformation promotes the sustainable development of non-manufacturing enterprises more than that of manufacturing enterprises; and the higher the degree of marketization of an enterprise, the greater the impact of enterprise digital transformation on its sustainable development. Meanwhile, through a series of robustness test candidates such as endogeneity test, alternative explanatory variables, and explanatory variables, and adding macroeconomic characteristics, the research conclusions still hold. In addition, through the analysis of the mechanism of action, it is found that enterprise digital transformation can enhance the sustainable development of enterprises by reducing the short-sighted behavior of managers, reducing the cost of financing and leverage, and then enhancing the level of sustainable development of enterprises.