Digital Transformation and Enterprise Operating Costs: Evidence from Chinese A-Share Listed Firms

This study examines the impact of digital transformation on enterprise operating costs and elucidates its underlying transmission mechanisms. Digital transformation is measured using a text-based indicator constructed from digital-transformation-related keyword frequencies in firms’ annual reports. Using an unbalanced panel of Chinese A-share listed firms from 2007 to 2023, we employ two-way fixed effects models, mediation analysis, and instrumental-variable estimation for empirical analysis. The findings reveal: (1) Digital transformation significantly reduces enterprise operating costs, with this conclusion maintaining robustness across a comprehensive series of endogeneity treatments and alternative specifications. (2) Enterprise innovation, highly skilled talent, and corporate governance appear to be important channels through which digital transformation contributes to cost reduction. The results are consistent with a complete mediation pattern for enterprise innovation, a partial mediation pattern for highly skilled talent, and a significant mediating role for corporate governance. (3) The cost-reducing effect appears more evident in state-owned enterprises, growth-stage enterprises, and firms located in eastern regions, while the central-region results suggest possible short-term cost increases. This study helps clarify the internal mechanisms through which digital transformation affects enterprise cost control and provides empirical evidence that may inform firms’ digital strategies and related policy design. From a sustainability perspective, these findings suggest that digital transformation may help improve resource efficiency, reduce organizational waste, and strengthen long-term resilience, thereby carrying potential implications for sustainable economic development.