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ESG dynamics in modern digital world: empirical evidence from firm life-cycle stages

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Abstract

The study investigates how corporate digital transformation (DT) affects Environmental, Social, and Governance (ESG) performance and how this impact varies across different stages of a firm’s life cycle (FLC). We analyze data from 6039 Chinese A-share listed firms spanning the years 2010 to 2019 using panel regression with fixed effects. The initial findings underscore the significant and positive influence of DT on firms’ ESG performance, indicating companies that embrace DT tend to outperform their peers in various ESG dimensions. To bolster these findings, we employ robust sensitivity analysis techniques, including sysGMM estimation, propensity score matching, and alternative variable methodologies. Moreover, the channel analysis demonstrates that firm performance acts as a mediator in the relationship between DT and ESG. Additionally, supplementary analysis reveals that the positive impact of DT on ESG performance is most pronounced during the maturity and decline phases of the FLC. Notably, this effect is even more substantial among state-owned enterprises compared to non-state-owned counterparts. Overall, our study findings contribute to ESG dynamics in firms and provide valuable insights that can assist practitioners in formulating and executing effective ESG strategies in the digital world.

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Data availability

This study is based on secondary dataset. All the financial data are available on CSMAR (https://cn.gtadata.com), and ESG data extract from Bloomberg (https://data.bloomberg.com/).

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Authors and Affiliations

  1. Yunnan Technology and Business University, Kunming, China

    Dan Hou & R. M. Ammar Zahid

  2. Jiangsu Vocational College of Business, Nantong, Jiangsu, China

    ZhongJi Liu

  3. School of Economics and Finance, Xi’an Jiaotong University, Xi’an, 710061, People’s Republic of China

    Umer Sahil Maqsood

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  1. Dan Hou
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  2. ZhongJi Liu
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  4. Umer Sahil Maqsood
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Contributions

DH and ZL contributed to conceptualization; DH involved in methodology; RMAZ provided software; DH, ZL, RMAZ and USM involved in validation; DH involved in formal analysis and revisions; ZL involved in investigation and revision; DH provided resources; ZL involved in data curation and revision; DH involved in writing—revised draft preparation; USM involved in writing—review and editing; RMAZ and USM involved in proof reading and validation and project administration. All authors have read and agreed to the published version of the manuscript.

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Correspondence to ZhongJi Liu or Umer Sahil Maqsood.

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Hou, D., Liu, Z., Zahid, R.M.A. et al. ESG dynamics in modern digital world: empirical evidence from firm life-cycle stages. Environ Dev Sustain (2024). https://doi.org/10.1007/s10668-023-04425-0

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