Using Chinese A-share listed firms from 2011 to 2023, this study develops and tests a dual-engine framework in which digital transformation and green technological innovation constitute two core transmission channels through which digital finance improves corporate ESG performance. Based on the FinTech Innovation Regulatory Pilot Policy in China, we implemented a staggered DID model for causal identification. Then, we further conducted a series of robustness checks, including Bartik IV, to address residual endogeneity concerns. We found that (1) digital finance can enhance corporate ESG performance, with particularly strong effects on the environmental and governance dimensions. (2) Digital transformation and green technological innovation are the primary mechanisms through which digital finance improves ESG performance. (3) The interaction between digital transformation and green technological innovation forms mutually reinforcing “dual engines” that amplify the benefits of digital finance for ESG performance. (4) Higher institutional investors’ shareholding ratio strengthens the positive effect of digital finance on corporate ESG performance, consistent with the role of external governance. (5) The enabling effect of digital finance is more pronounced among firms in the introduction, growth, and maturity stages of the corporate lifecycle, as well as among firms located in eastern and central regions and in non-heavy-polluting industries. This study uncovers the internal logic by which digital finance advances corporate sustainability through technological upgrading and environmental innovation, and it provides theory-driven and empirically grounded evidence for building integrated ESG governance frameworks. The results offer actionable insights for firms worldwide pursuing the twin goals of digitalization and green development under carbon neutrality targets.
Song et al. (2025) studied this question.