The moderating role of strategic leadership in digital transformation on the ESG–financial performance relationship

In the context of enhanced global sustainable governance, environmental, social, and governance (ESG) has become an important indicator for capital markets to assess long-term resilience. However, empirical evidence on the relationship between ESG and financial performance in emerging markets remains inconsistent, and the role of digital strategic leadership (DSL) has not been systematically examined. Using data from Chinese A-share listed companies, this study explores the ESG-financial performance relationship and the moderating role of DSL. The results show a U-shaped relationship between ESG and corporate profitability. ESG investment may be associated with short-term cost pressure at lower ESG levels, while its potential benefits become more visible as ESG accumulation increases and the association turns positive after the estimated turning point. The linear moderating effect of DSL is statistically insignificant. However, after DSL exceeds a certain threshold, the ESG–financial performance pattern differs significantly, suggesting that this association is related to long-term ESG accumulation and varies across DSL stages. These findings provide implications for arranging ESG investment rhythms and designing supportive policies.