Corporate digital transformation and financing cost of green bond: evidence from China

Purpose This study aims to examine whether and how corporate digital transformation (CDT) affects green bond financing costs. Drawing on signaling and agency theories, it argues that CDT lowers credit spreads by improving environmental information credibility and internal control quality. Design/methodology/approach Using firm–bond observations from Chinese A-share listed companies issuing green bonds between 2016 and 2024, this study applied a text-based CDT index from annual reports and measures financing cost using credit spreads over matched risk-free benchmarks. Fixed-effects regressions are supplemented by alternative variable measurements, entropy balancing, instrumental-variable estimation and channel tests. Findings CDT is significantly associated with lower green bond credit spreads, and the result remains robust across multiple specifications. Channel analyses show that CDT reduces financing costs partly by improving environmental information disclosure quality and strengthening internal control quality. Sobel and bootstrap tests further support these partial mediation effects. Originality/value This study extends CDT research to sustainable finance and identifies digital transformation as a firm-level determinant of green bond pricing. It shows that CDT helps reduce green-specific information and agency frictions related to environmental credibility, use-of-proceeds integrity and greenwashing risk.