Digitalization systematically shifts the balance between green narratives and substantive green performance in China

Digital transformation can reduce information friction and in turn promote green innovation. This study, however, shows a more complex pattern. Digitalization not only enables firms to innovate more effectively, but also changes how they produce, communicate, and refine green messages, making visible green claims more likely to run ahead of verifiable green outcomes. Based on a firm-level panel of Chinese listed companies from 2013 to 2024, this study finds that a one-standard-deviation increase in digital transformation is associated with an approximately 7% increase in the green innovation bubble. This implies that digital transformation widens the gap between green patent applications and authorizations. The study also finds that the alleviation of financing constraints is consistent with this relationship, as the evidence suggests that additional financial resources may initially support visible green narratives rather than being converted simultaneously into verifiable technological substance. Moreover, the narrative–substance discrepancy is not uniform across regions. The digitalization-related bubble effect is strongest in low-to-moderate digital financial inclusion cities, but becomes substantially weaker in the most advanced digital-finance ecosystems, which is consistent with stronger screening and discipline at higher levels of financial digitalization. The findings indicate that governance in a digitalization-driven green transition should move beyond expanding visibility and pay greater attention to limiting narrative lead, ensuring that green signals do not systematically run ahead of green substance.