The Interaction Effects of Board Independence and Digital Transformation on Environmental, Social, and Governance Performance: Complementary or Substitutive?

Both board independence (BI) and digital transformation (DT) play important roles in promoting Environmental, Social, and Governance (ESG) performance. However, few studies have focused on their interaction effects on ESG performance (ESGP). The study selected Chinese A-share listed companies from 2013 to 2023 as the research sample and used a moderating effect model to test the complementary or substitutive relationship between the two. The empirical results show that there is a substitutive effect, rather than a complementary one. Further analysis of the individual ESG pillars revealed that the substitutive effect of BI and DT is primarily reflected in corporate governance. Moreover, this substitutive effect is more pronounced in state-owned enterprises and non-manufacturing enterprises, and digital supervision mechanisms may have a stronger substitutive role than traditional independent director oversight mechanisms. These findings uncover the complex relationship between the two governance mechanisms and corporate ESGP, offering important insights for managers; companies need to strike a balance between “human governance” and “digital governance” to maximize ESGP.