Digital transformation and corporate financialization in emerging markets: Evidence from China

Abstract

Corporate financialization poses serious challenges to the development of the real economy. In the context of promoting the deep integration of the digital economy and the real economy, it is crucial to explore whether digital transformation can inhibit corporate financialization. Using data from Chinese listed companies from 2009 to 2021, we construct a fixed effects model and find that digital transformation significantly reduces the level of corporate financialization, a conclusion that still holds after a series of robustness tests such as propensity score matching and adding control variables. Channel analysis shows that that digital transformation inhibits corporate financialization by enhancing the information mobility and operational capability of corporations. In addition, this effect is more pronounced at higher levels of industry competition as well as marketization. Finally, we also find structural differences in the impact of digital transformation on corporate financialization. Our study explores the determinants of corporate financialization in terms of a firm's mode of operation and type of strategy, and the findings provide a theoretical basis for the active development of digital technologies in emerging markets that are undergoing economic transitions, as well as for guarding against the shift of the economy from the real to the virtual.

Keywords

• Digital transformation
• Corporate financialization
• From real to virtual
• Real economy