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Digital transformation, product market competition, and dynamic adjustment of working capital

Author

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  • Li, Xiaotao
  • Zhou, Hua

Abstract

Based on the financial data of China's A-share listed companies from 2007 to 2023, this study empirically analyzes the mechanism by which product market competition influences the deviation of working capital from the target level of enterprises and path of its adjustment speed from a dynamic perspective. Further, it explores the moderating effect of digital transformation on it. The results show that an optimal target value for working capital requirements exists for listed companies in China. Product market competition is one of the key factors affecting this target value. It also significantly impacts the degree of deviation from the target level and the speed of adjustment of working capital requirements. The higher the degree of product market competition, the greater the deviation of actual working capital requirements. From the target level. However, the speed of adjustment to the target level is significantly accelerated. Further research finds that digital transformation can effectively inhibit the amplifying effect of product market competition on the degree of working capital requirements deviation and further strengthen the facilitating effect of product market competition on the speed of adjustment. This study provides a decision-making basis and a theoretical framework for enterprises to optimize working capital allocation, enhance supply chain synergy efficiency, and prevent liquidity risk in the competitive market environment of the digital economy.

Suggested Citation

  • Li, Xiaotao & Zhou, Hua, 2025. "Digital transformation, product market competition, and dynamic adjustment of working capital," International Review of Financial Analysis, Elsevier, vol. 107(C).
    • Handle: RePEc:eee:finana:v:107:y:2025:i:c:s1057521925006775
    DOI: 10.1016/j.irfa.2025.104590
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    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • M10 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - General
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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