How does digital transformation moderate the link between ESG ratings and financial constraints?

This research aims to examine the moderating role of digital transformation in the link between ESG ratings and financing constraints faced by firms. A sample is a dataset consisting of 4255 listed companies operating in China from 2012 to 2022. The results showed that higher ESG ratings contribute to reducing financing constraints and that digital transformation positively enhances this relationship. In addition, the results also reveal that long-term ESG ratings contribute more effectively to reducing financing constraints. This study provides guidance for managers to practice ESG practices in the long term and insights for firms to find solutions to financing dilemmas. This study's originality lies in demonstrating that higher ESG ratings alleviate financing constraints, with digital transformation enhancing this effect, providing novel insights into the interplay between sustainability efforts and technological advancement in corporate finance. The findings offer valuable implications for firms integrating ESG practices and digital strategies to optimize financial performance.