Digital Transformation and Green Investment of Heavily Polluting Enterprises: The Threshold Effects of Heterogeneous Environmental Regulations

Green investment is an effective way for heavily polluting enterprises to balance business and sustainable development goals. With digital transformation bringing profound changes to enterprises in the digital economy era, whether digital transformation may drive green investment in heavily polluting enterprises is still not thoroughly studied, and the role of various types of environmental regulations in this impact has been neglected. Therefore, utilizing panel data from 435 Chinese listed heavily polluting enterprises from 2011 to 2021, this study investigated the impact of digital transformation on green investment and examined the threshold effects of environmental regulations in this relationship. The findings reveal that: 1) digital transformation significantly promotes the green investment of heavily polluting enterprises and indirectly fosters green investment by alleviating financing constraints; 2) there exists a nonlinear impact of digital transformation on green investment depending on the type of environmental regulation. When command-control environmental regulation intensity exceeds the threshold, the contribution of digital transformation to green investment is amplified. When incentive-based environmental regulation exceeds the threshold, the contribution of digital transformation to green investment weakens; and 3) the heterogeneity analysis suggests that for small and medium-sized, key monitored, and well-controlled heavily polluting enterprises, the positive effect of digital transformation on green investment is particularly prominent. Based on these conclusions, we proposed targeted managerial and policy implications.