Does Fintech Improve Corporate ESG Performance? Evidence from China

Adopting Environmental, Social, and Governance (ESG) principles has become essential for the sustainable growth of businesses and the broader progress of society and the economy. As a result, enhancing corporate ESG performance has become an urgent priority for governments, companies, and various stakeholders. In the context of ongoing structural shifts in the financial sector driven by technological advancements, financial technology (FinTech) offers innovative approaches and solutions to tackle this challenge. This paper conducts an empirical analysis of how FinTech impacts corporate ESG performance, focusing on a sample of Chinese A-share listed companies from Shanghai and Shenzhen between 2013 and 2022. The findings demonstrate that FinTech significantly improves ESG performance, with this conclusion remaining consistent across multiple tests, including instrumental variable techniques, sample adjustments, and alternative measurement methods. Three key mechanisms through which FinTech influences ESG performance are identified: easing financing constraints, enhancing the quality of information disclosure, and strengthening internal corporate controls. Furthermore, the impact of FinTech is more pronounced in companies led by executives with a financial background, as well as in regions with higher levels of financial development and digital progress. This study provides a comprehensive analysis of the channels through which FinTech affects ESG performance, offering both theoretical insights and empirical evidence to support efforts to improve ESG outcomes for Chinese firms. It also carries important policy implications for promoting high-quality economic development in China and advancing the country’s sustainability objectives.