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Corporate digital transformation and financialization: Evidence from Chinese listed firms

Author

Listed:
  • Wu, Kai
  • Lu, Yufei

Abstract

We examine the relationship between digital transformation and corporate financialization using Chinese-listed firms from 2007 to 2021. Results show that digital transformation facilitates corporate financialization, and this positive relationship is pronounced among firms with high agency costs and low institutional ownership. We find that the profit-chasing motive for financialization is the predominant driving force. To verify the motivation, we find that risk-taking behaviors and the yield spreads between financial and tangible assets increase along with the digital transformation. To avoid excessive financialization, corporate managers and regulatory agencies should strengthen their corporate governance under digital transformation.

Suggested Citation

  • Wu, Kai & Lu, Yufei, 2023. "Corporate digital transformation and financialization: Evidence from Chinese listed firms," Finance Research Letters, Elsevier, vol. 57(C).
    • Handle: RePEc:eee:finlet:v:57:y:2023:i:c:s1544612323006013
    DOI: 10.1016/j.frl.2023.104229
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    Keywords

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    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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