Environmental Transparency Through Digital Transformation: Evidence on Carbon Disclosure Quality From China's Heavy‐Polluting Firms

ABSTRACT The rise of digital transformation (DT) has become an important driver of transparency in corporate environmental disclosure. Whether and how DT is related to the improvement of carbon information disclosure quality, particularly in heavily polluting firms that may have both information and symbolic roles, is still controversial. Based on the resource‐based view, information asymmetry theory, and signaling theory, this study examines the association between DT and carbon information disclosure quality in Chinese A‐share listed heavy‐polluting firms from 2017 to 2024. Using a multidimensional CIDQ index and panel data models, this study finds that DT is positively associated with carbon information disclosure quality. Additional analyses suggest that this relationship is linked to external monitoring channels, including media attention and audit effort, is stronger under higher product market competition, and is further strengthened when external monitoring and competition jointly increase. The results at the component level also reveal that the association is more obvious in carbon‐related business practices, carbon governance, and carbon performance rather than the disclosure carrier, which illustrates that DT may be more strongly associated with the content of carbon disclosure than with its reporting format or disclosure channel. Further analyses suggest a positive association between DT‐enabled disclosure quality and firms' environmental performance. Other analyses highlight that such an effect is more evident in state‐owned enterprises and areas with more advanced digital infrastructure. The study contributes to research on DT and environmental disclosure by showing both the transparency‐enhancing potential and the limitations of digitalized carbon reporting.