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This study aims to determine the impact of corporate digital transformation on the audit opinions of auditors in A-share nonfinancial listed companies in China. It also examines how corporate internal control and corporate social responsibility (CSR) disclosure levels moderate this effect. This study fills a gap in the literature by investigating the impact of digital transformation on business performance, especially in the Chinese context, where digital transformation is rapidly progressing. This study also offers practical guidance for practitioners on whether and how to undergo a digital transformation and enhance their internal governance and social responsibility practices.

This study uses a sample of 2,637 Chinese A-share nonfinancial listed companies from 2009–2022, after excluding firms with ST, ST* or PT status; negative revenue; and missing data for three or more consecutive years. Digital transformation index data is collected from firms’ annual reports, and the other microlevel data from the Wind and CSMAR databases. The authors winsorize the data at 1% for outliers, resulting in 17,305 firm-year observations. This study uses fixed-effects logistic regression with clustered robust standard errors to analyze the binary dependent variable. This study also performs various robustness checks, such as probit model, multilevel fixed effects model and IV 2SLS estimations, to confirm the validity of the results.

This study reveals that digital transformation leads to standard unqualified audit opinions, meaning that companies that invest more in digital technologies and capabilities has more tendency to receive standard unqualified audit opinions, which signify the reliability and credibility of their financial reporting. This study also finds that corporate internal control and CSR disclosure levels positively moderate the effect of digital transformation on audit opinions. This study further conducts heterogeneity analysis and shows that the positive effect is originated by the state-owned enterprises, firms audited by non-Big4 auditing firms, firms with high internal control levels and firms with low CSR disclosure levels. The results are robust to different econometric methods.

This study contributes to the literature by providing empirical evidence on how digital transformation influences audit quality and credibility and how internal governance and social responsibility practices strengthen this influence. This study also has practical implications for practitioners by providing advice on whether and how to pursue a digital transformation and improve their internal governance and social responsibility practices. This study demonstrates its originality by reviewing the existing literature from three theoretical perspectives: stakeholder, signaling and reputation, and identifying the research gap that the study addresses. This study also compares its findings with previous studies and discusses the implications and limitations of its research. This study also proposes directions for future research based on its findings.

In this study, we examine the influence of a firm’s environmental, social, and governance (ESG) performance on analysts’ stock recommendations and earnings forecast accuracy in the Chinese context.

We take a textual analysis approach to analyst research reports issued between 2010 and 2019, and differentiate between two distinct analyst categories: “sustainability analysts,” which refer to those more inclined to incorporate ESG information into their analyses, and “other analysts.”

Our evidence indicates that sustainability analysts tend to be significantly more likely than others to provide positive stock recommendations and demonstrate enhanced accuracy in forecasting earnings for companies with superior ESG performance. Our additional analyses reveal that this finding is particularly prominent for analysts who graduated from institutions emphasizing the protection of the environment, those recognized as star analysts, those affiliated with ESG-oriented brokerages, and forecasts made by analysts in the later part of the sample period. Our findings further indicate that sustainability analysts exhibit a more pronounced negative response when confronted with a negative ESG event.

In general, the evidence from this study reveals the interplay between ESG factors and analyst behavior, offering valuable implications for both financial analysts and sustainable investment strategies.