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Does digital transformation restrain corporate financialization? Evidence from China

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  • Zhang, Ziqi
  • Su, Zhi
  • Tong, Fang

Abstract

We investigate the effect of digital transformation on corporate financialization using a sample of Chinese listed firms from 2012-2021. We find that digital transformation exerts a negative impact on corporate financialization by decreasing financial investments while increasing real investments. More innovative activities and less operational uncertainty are two plausible channels that enable digital transformation to redeploy a greater number of resources from financial assets to real investments. We show that the effect of digital transformation on financialization is more prominent in companies with greater internal investment efficiency and external marketization levels. Our paper provides new insights on the effect of digital transformation on corporate financialization.

Suggested Citation

  • Zhang, Ziqi & Su, Zhi & Tong, Fang, 2023. "Does digital transformation restrain corporate financialization? Evidence from China," Finance Research Letters, Elsevier, vol. 56(C).
    • Handle: RePEc:eee:finlet:v:56:y:2023:i:c:s154461232300524x
    DOI: 10.1016/j.frl.2023.104152
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    Cited by:

    1. Wang, Sai & Wen, Wen & Niu, Yuhao & Li, Xin, 2024. "Digital transformation and corporate labor investment efficiency," Emerging Markets Review, Elsevier, vol. 59(C).
    2. Li, Cong & Liu, Jiaxuan & Liu, Yuwei & Wang, Xiaoyu, 2023. "Can digitalization empowerment improve the efficiency of corporate capital allocation? —Evidence from China," Economic Analysis and Policy, Elsevier, vol. 80(C), pages 1794-1810.
    3. Xiuhai Huang & Zhenyu Xu, 2024. "Has the development of the digital economy increased corporate financial asset holdings? --A quasi-natural experiment based on the "Broadband China" policy," Journal of Economic Statistics, Anser Press, vol. 2(1), pages 18-37, January.
    4. repec:bba:j00005:v:2:y:2024:i:1:p:19-38:d:284 is not listed on IDEAS
    5. Li, Pingrui & Zhao, Xu, 2024. "The impact of digital transformation on corporate supply chain management: Evidence from listed companies," Finance Research Letters, Elsevier, vol. 60(C).
    6. Lin, Baoguo & Dong, Xueqin, 2024. "Empirical Study on the Impact of Digital Finance on Commercial Credit Allocation in SMEs," Finance Research Letters, Elsevier, vol. 61(C).
    7. Guo, Borui & Huang, Xiaoxia, 2024. "Digital transformation tone signal and the cost of equity: Evidence from Chinese listed companies," Finance Research Letters, Elsevier, vol. 59(C).

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    More about this item

    Keywords

    Digital transformation; Corporate financialization; Real investment;
    All these keywords.

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology

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