Digital Economy Development and Corporate Bankruptcy Risk: Based on the Perspective of Institutional Isomorphism

Digital economy development gives birth to new market norms and competition rules, which push digital transformation and further form the legitimacy isomorphism effect to decrease corporate bankruptcy risk. Using a sample of Chinese listed firms from 2011 to 2019, this study investigated how digital economy development influences corporate bankruptcy risk. We observe a negative relationship between digital economy development and bankruptcy risk. This negative relationship is more pronounced in firms when the degree of digital transformation, managerial incentive and internal supervision is expected to be high.Additionally, the risk effect of digital economy is more pronounced for firms with more media coverage, lower urban wealth, industry competition, and better government governance. Our study has implications for research on the microeconomic consequences of digital economy development and the factors influencing corporate bankruptcy risk, providing empirical evidence for bankruptcy risk management in the digital economy era.