IDEAS home Printed from https://ideas.repec.org/a/eee/riibaf/v73y2025ipbs0275531924004434.html
   My bibliography  Save this article

Booster or trapper? Corporate digital transformation and capital allocation efficiency

Author

Listed:
  • Fu, Yumei
  • Guo, Chun

Abstract

This study examines the effects of digital transformation on firm-level capital allocation efficiency by focusing on Chinese listed firms from 2007 to 2022. Using the investment-Q framework, we provide evidence that digital transformation enhances investment sensitivity to Q, suggesting that digital transformation improves firms’ capital investment efficiency. Further research shows that digital transformation enhances capital allocation efficiency by alleviating information asymmetry, reducing agency costs, and easing financial constraints. Cross-sectional surveys reveal that the positive effect of digital transformation on capital investment efficiency is more pronounced for firms with more corporate diversification, in high-technology industry, those with more subsidiaries, and those facing higher industry competition and economic policy uncertainty. Overall, from the perspective of capital allocation efficiency, digital transformation is the booster rather than the trapper for firms in developing markets. This study enriches the literature on investment efficiency and has significant implications for firms’ digital transformation.

Suggested Citation

  • Fu, Yumei & Guo, Chun, 2025. "Booster or trapper? Corporate digital transformation and capital allocation efficiency," Research in International Business and Finance, Elsevier, vol. 73(PB).
    • Handle: RePEc:eee:riibaf:v:73:y:2025:i:pb:s0275531924004434
    DOI: 10.1016/j.ribaf.2024.102650
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0275531924004434
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.ribaf.2024.102650?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item

    Keywords

    Digital transformation; Capital allocation efficiency; Information asymmetry; Agency costs; Financing constraints;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:riibaf:v:73:y:2025:i:pb:s0275531924004434. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/ribaf .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.