The Impact of Digital Transformation on Corporate Environment Performance: Evidence from China

Abstract

In recent years, the rate of climate change appears to have accelerated, and digital transformation and environmental performance have become increasingly important in the field of corporate social responsibility. Previous studies have mainly focused on the economic consequences of digital transformation. However, research on the effect of digital transformation on reducing firms’ emissions is relatively rare. This study focused on two kinds of typical environmental pollutants: waste gas emissions and wastewater emissions. Using data on Chinese listed firms from 2010 to 2018 and adopting the fixed effect model to investigate the emission reduction effect and mechanism of digital transformation on waste gas emissions and wastewater emissions of firms, we found the following: (1) digital transformation significantly reduces pollution emissions; (2) the relationship is more pronounced in state-owned enterprises (SOEs), high-polluting enterprises, and economically developed regions; (3) to gain a more in-depth understanding of how digital transformation affects the pollution emission behavior of firms, we further conducted mechanism tests and found that digital transformation reduces pollution by increasing total factor productivity and green innovation and improving firms’ internal controls. The above conclusions still hold after a series of robustness tests, including alternative econometric specifications and overcoming potential endogeneity with an instrumental variable. Overall, our findings provide new insights into the effect of digital transformation on environmental pollution emissions. Hence, all governments should pay more attention to digital transformation for sustainable development and improved environmental quality.

Employee Stock Ownership Plans and Corporate Environmental Performance: Evidence from China

“…X is a vector of the control variables. Referring to Long et al (2022) [ 2 ] and Wang et al (2022) [ 14 ], all variable definitions are presented in Table 1 , including Size , Lev , Roa , Growth , Cash , PPE , Age , Soe , Mshare , Top1 , Board , and Dual . λ and μ are the fixed effects for year and firm.…”

“…Green technology represents the efficiency of energy resource utilization and the pollution control ability of enterprises. A higher level of green technology means that enterprises can conserve the energy resources they consume, lower their production of toxic substances and reduce the emission of pollutants in the production process [ 14 , 38 ]. For example, using data from Chinese listed enterprises, Long et al (2022) [ 2 ] and Ma et al (2022) [ 38 ] found that green technology is an important driver for improving corporate environmental performance.…”

“…We further tested whether ownership structure affects the relationship between ESOPs and corporate environmental performance. On the one hand, compared with non-state-owned enterprises (non-SOEs), state-owned enterprises (SOEs) usually bear more social responsibilities that compel them to pay more attention to environmental protection [ 14 , 50 ]. As a result, ESOPs in SOEs are more likely to motivate employees to make extra efforts in environmental protection, and the improvement in corporate environmental performance is more obvious.…”

“…First, following Wang et al (2022) [ 14 ], we used the total factor productivity ( TFP ) estimated by the LP method to measure the productivity of enterprises. Then, we replaced the dependent variable of the baseline regressions with TFP .…”

“…Severe air pollution in China is now responsible for 20% of deaths, killing 4000 people per day [ 1 ]. In response to environmental challenges, the Chinese government has implemented various environmental regulatory policies to reduce the environmental pollution caused by industrial production, and high-polluting enterprises are facing tremendous pressure to improve their environmental performance [ 14 ]. Our findings can, therefore, provide timely policy implications for enterprises in emerging economies facing similar problems.…”