How does audit digitalization stimulate corporate green innovation? The mediating role of R&D investment

Abstract

Purpose

This paper aims to investigate how digitalization empowers government auditing with technical power to serve national governance better.

Design/methodology/approach

This study measures the audit digitalization (AD) index by textual analysis method and matches the provincial AD index with the Chinese listed firm’s data from 2011 to 2019. The two-way fixed effect regression is used to explore the nexus of audit digitalization and corporate green innovation.

Findings

The empirical results demonstrate that government audit digitalization stimulates corporate green innovation, especially for substantive green innovation. Research and development expenditures on personnel and capital are influential mediators and are increased by audit digitalization. The heterogeneity analysis indicates the anti-driving effect for fewer audit informatization expenditures or lower environmental audit coverage, and the incentive effect for state-owned enterprises or firms with corporate social responsibility reports.

Originality/value

The incremental contribution lies in recognizing the progress of government audit digitalization and its role from digital to environmental governance, which extends digital capabilities and digital expertise into the government audit view. Based on textual analysis, a reliable dictionary of audit digitalization is built by machine-learning methods. Then, the authors confirm the effectiveness of audit digitalization, especially when other forms of digitalization fail to promote substantive green innovation. This study also attests to the anti-driving and incentive effect from the external governance perspective. The authors’ findings have implications for digital ecological civilization.

Citation

Zhang, Z. and Shi, W. (2024), "How does audit digitalization stimulate corporate green innovation? The mediating role of R&D investment", Managerial Auditing Journal, Vol. 39 No. 7, pp. 799-820. https://doi.org/10.1108/MAJ-08-2023-4013