Spatial Spillover Effects of Digital Finance on Corporate ESG Performance

Abstract

Digital finance (DF), powered by technology and efficient information flow, breaks traditional temporal and geographical constraints, affecting the sustainable development of enterprises in both local and neighbouring regions. Environmental, social, and governance (ESG) factors are crucial for the long-term sustainability of enterprises. This paper explores the spatial spillover effects of DF on corporate ESG performance, using city-enterprise match data from 2011 to 2022. The results show that DF significantly improves corporate ESG performance in both local and neighbouring regions, and that the improvement in neighbouring regions is mainly achieved through labour mobility, capital mobility, and technology diffusion. A heterogeneity analysis further revealed that DF improves corporate ESG performance more significantly in regions with large-scale economies and well-developed digital infrastructure. These findings provide a timely evaluation of the social value of DF in emerging economies like China, viewed through the lens of ESG, and highlight the spatial spillover effects of DF on corporate ESG performance. This has significant implications for policymakers and business leaders, by suggesting that investments in DF can drive broader regional improvements in corporate sustainability practices and enhance overall economic and environmental outcomes.