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Digital transformation, life cycle and internal control effectiveness: Evidence from China

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  • Zhao, Tianyu
  • Yan, Na
  • Ji, Liya

Abstract

Based on corporate life cycle theory, this paper investigates the impact of digital transformation on the effectiveness of internal control by analyzing data from Chinese listed companies from 2007–2021. The empirical results show that digital transformation can improve internal control effectiveness by alleviating information asymmetry and reducing agency costs, and that this effect is significant to firms in growth and maturity stage, but not firms in decline stage. In addition, digital transformation has a more significant effect on the effectiveness of internal control in high-tech enterprises and manufacturing firms. This paper provides insights into the impact of digital transformation on corporate governance and have policy implications for promoting smooth capital market operation.

Suggested Citation

  • Zhao, Tianyu & Yan, Na & Ji, Liya, 2023. "Digital transformation, life cycle and internal control effectiveness: Evidence from China," Finance Research Letters, Elsevier, vol. 58(PA).
    • Handle: RePEc:eee:finlet:v:58:y:2023:i:pa:s1544612323005950
    DOI: 10.1016/j.frl.2023.104223
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    References listed on IDEAS

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    1. Chen, Yufeng & Xu, Jing, 2023. "Digital transformation and firm cost stickiness: Evidence from China," Finance Research Letters, Elsevier, vol. 52(C).
    2. Chalmers, Keryn & Hay, David & Khlif, Hichem, 2019. "Internal control in accounting research: A review," Journal of Accounting Literature, Elsevier, vol. 42(C), pages 80-103.
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