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Can digitalization empowerment improve the efficiency of corporate capital allocation? —Evidence from China

Author

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  • Li, Cong
  • Liu, Jiaxuan
  • Liu, Yuwei
  • Wang, Xiaoyu

Abstract

In the digital economy era, digital empowerment is a crucial measure to enhance capital allocation efficiency (CAE). To examine the effect of digital empowerment on CAE, we conducted a study using Chinese listed firms as a research sample. Our findings indicate that (1) Digital empowerment significantly enhances the CAE. (2) Digital empowerment improves the CAE in enterprises by reducing agency costs and enhancing operational capabilities. (3) This effect is even more pronounced in non-state-owned enterprises, enterprises with low leverage, and those with weak levels of external oversight. (4) Further research suggests that digital empowerment leads to a reduction in under investments and reduces operating investments. The research in the article provides a theoretical framework for enterprises to enhance CAE and governance level. It also offers policy insights for promoting effective digital transformation of businesses and presents valuable references for advancing digital economy in China.

Suggested Citation

  • Li, Cong & Liu, Jiaxuan & Liu, Yuwei & Wang, Xiaoyu, 2023. "Can digitalization empowerment improve the efficiency of corporate capital allocation? —Evidence from China," Economic Analysis and Policy, Elsevier, vol. 80(C), pages 1794-1810.
    • Handle: RePEc:eee:ecanpo:v:80:y:2023:i:c:p:1794-1810
    DOI: 10.1016/j.eap.2023.11.014
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