How Does Artificial Intelligence Improve Corporate ESG Performance?

Based on a 2012–2023 panel of 1774 Chinese A-share listed firms, this study examines how artificial intelligence transformation affects corporate ESG performance. We identify AI transformation from annual report text and estimate its effect using a DID framework. The estimates indicate that AI transformation is linked to higher ESG performance, with results remaining stable across alternative specifications. Further analysis indicates that green innovation and governance improvement are two main channels, with stronger effects among firms with state ownership, lower technological intensity, and heavier pollution exposure. These findings provide quasi-experimental evidence on the sustainability implications of corporate AI transformation.