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Inefficient investment and digital transformation: What is the role of financing constraints?

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  • Xu, Guiyang
  • Li, Guanggui
  • Sun, Peibo
  • Peng, Dan

Abstract

This paper empirically examines the effect of inefficient corporate investment on digital transformation, using Chinese listed companies from 2007 to 2019 as a sample, and finds that inefficient investment is not conducive to improving digitalization. We find that the greater the financing pressure on a company, the worse the digital transformation, and financing constraints exacerbate this negative effect. Among state-owned, private and highly digitalized companies, the negative impact of inefficient investment on digital transformation intensifies as the pressure of financing constraints increase. To combat inefficient investment, enterprises should optimize their investment structure, reduce their financing constraints, and improve their risk prevention mechanisms.

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  • Xu, Guiyang & Li, Guanggui & Sun, Peibo & Peng, Dan, 2023. "Inefficient investment and digital transformation: What is the role of financing constraints?," Finance Research Letters, Elsevier, vol. 51(C).
    • Handle: RePEc:eee:finlet:v:51:y:2023:i:c:s1544612322006067
    DOI: 10.1016/j.frl.2022.103429
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