Corporate digital transformation and financialization: Evidence from Chinese listed firms

• Published in: Finance research letters Vol. 57; p. 104229
• Main Authors: Wu, Kai, Lu, Yufei
• Format: Journal Article
• Language: English
• Published: Elsevier Inc 01.11.2023
• Subjects: Corporate financialization; Digital transformation; Profit-chasing; Profit-chasing; Corporate financialization; Digital transformation; O16; O33; G32
• ISSN: 1544-6123; 1544-6131
• DOI: 10.1016/j.frl.2023.104229

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. •The relationship between digital transformation and corporate financialization is examined.•Digital transformation facilitates corporate financialization.•The relationship is stronger in firms with high agency costs and low institutional ownership.•We find that the profit-chasing motive for financialization is the predominant driving force.