Executive compensation stickiness and ESG performance: The role of digital transformation

Abstract

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A growing number of institutional investors have realized that environmental, social, and governance (ESG) performance has become financial in the long run, but the implementation of ESG approaches at the enterprise’s executive level remains insufficient. Furthermore, urgent attention needs to be paid to the full application of digital solutions for resource allocation and sustainable development. We have directed this research interest toward searching for potential approaches to sustainable digital transformation for the environment. Encouraged by the asymmetric effect between executive compensation stickiness (ECS) and ESG goals, executives are more willing to improve the ESG indices by digital transformation (DT) activities. This study employs 18,098 observations from Chinese A-share listed companies to examine the impact of ECS on ESG indicators. Our results show that ECS can significantly improve the ESG scores, whereas DT played a partial mediating role within this promotion. We further examined this relationship by the bootstrap and Sobel methods and found that all empirical results are robust and credible. Our findings provide more practical enlightenment at the management aspect for improving environmental performance through digital transformation.

Keywords

• executive compensation stickiness
• ESG performance
• digital transformation
• bootstrap
• Sobel