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The impact of environmental, social, and governance (ESG) practices on investment efficiency in China: Does digital transformation matter?

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  • Lin, Yongjia
  • Lu, Zhenye
  • Wang, Yizhi

Abstract

This paper examines whether environmental, social, and governance (ESG) practices affect firm investment efficiency and further discusses how digital transformation (DT) plays a significant role in this relationship in the context of China’s rapidly growing digital economy. The result suggests that ESG practices enhance firm investment efficiency by mitigating information asymmetries and agency conflicts. We also show that the positive relationship between ESG practices and firms’ investment efficiency is more pronounced for firms with high levels of DT.

Suggested Citation

  • Lin, Yongjia & Lu, Zhenye & Wang, Yizhi, 2023. "The impact of environmental, social, and governance (ESG) practices on investment efficiency in China: Does digital transformation matter?," Research in International Business and Finance, Elsevier, vol. 66(C).
    • Handle: RePEc:eee:riibaf:v:66:y:2023:i:c:s0275531923001769
    DOI: 10.1016/j.ribaf.2023.102050
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    References listed on IDEAS

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    1. Hoje Jo & Maretno Harjoto, 2011. "Corporate Governance and Firm Value: The Impact of Corporate Social Responsibility," Journal of Business Ethics, Springer, vol. 103(3), pages 351-383, October.
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    3. Eduardo Duque-Grisales & Javier Aguilera-Caracuel, 2021. "Environmental, Social and Governance (ESG) Scores and Financial Performance of Multilatinas: Moderating Effects of Geographic International Diversification and Financial Slack," Journal of Business Ethics, Springer, vol. 168(2), pages 315-334, January.
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    5. Beat Reber & Agnes Gold & Stefan Gold, 2022. "ESG Disclosure and Idiosyncratic Risk in Initial Public Offerings," Journal of Business Ethics, Springer, vol. 179(3), pages 867-886, September.
    6. Lu Zhang & Yuan George Shan & Millicent Chang, 2021. "Can CSR Disclosure Protect Firm Reputation During Financial Restatements?," Journal of Business Ethics, Springer, vol. 173(1), pages 157-184, September.
    7. Mohammed Benlemlih & Mohammad Bitar, 2018. "Corporate Social Responsibility and Investment Efficiency," Journal of Business Ethics, Springer, vol. 148(3), pages 647-671, March.
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    Citations

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    Cited by:

    1. Iqbal, Najaf & Umar, Zaghum & Ruman, Asif M. & Jiang, Shaohua, 2024. "The term structure of yield curve and connectedness among ESG investments," Research in International Business and Finance, Elsevier, vol. 67(PA).
    2. Dicuonzo, Grazia & Palmaccio, Matteo & Shini, Matilda, 2024. "ESG, governance variables and Fintech: An empirical analysis," Research in International Business and Finance, Elsevier, vol. 69(C).
    3. Galeone, Graziana & Ranaldo, Simona & Fusco, Antonio, 2024. "ESG and FinTech: Are they connected?," Research in International Business and Finance, Elsevier, vol. 69(C).
    4. Khurram, Muhammad Usman & Abbassi, Wajih & Chen, Yifan & Chen, Lifeng, 2024. "Outward foreign investment performance, digital transformation, and ESG performance: Evidence from China," Global Finance Journal, Elsevier, vol. 60(C).
    5. Bai, Keke & Jing, Kun & Li, Tianyu, 2024. "Corporate ESG Performance and Stock Pledge Risk," Finance Research Letters, Elsevier, vol. 60(C).
    6. Li, Pingrui & Zhao, Xu, 2024. "The impact of digital transformation on corporate supply chain management: Evidence from listed companies," Finance Research Letters, Elsevier, vol. 60(C).
    7. Kiran, Madiha & Chughtai, Sumayya & Naeem, Muhammad Abubakr, 2024. "Navigating greenwashing in the G8: Insights into family-owned firms, technology innovation, and economic policy uncertainty," Research in International Business and Finance, Elsevier, vol. 71(C).
    8. BENKRAIEM, Ramzi & GAAYA, Safa & LAKHAL, Faten, 2024. "Tax avoidance, investor protection, and investment inefficiency: An international evidence," Research in International Business and Finance, Elsevier, vol. 69(C).

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    More about this item

    Keywords

    ESG practices; Investment efficiency; Digital transformation;
    All these keywords.

    JEL classification:

    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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