Digitalization Improves Enterprise Performance: New Evidence by Text Analysis

Abstract

The reform of digitalization has deeply influenced the development mode and production methods of traditional production in China. However, the impact of digitalization on the management performance of Chinese listed companies are not well investigated and there is a gap in the establishment of digitalization effective measurement variable. In order to fill this gap, this article constructs a variable to measure the application degree of “digitalization” at the company level. By analyzing the text of the annual reports of Chinese listed companies from 2009 to 2020, the effective variables to measure “digitalization” are determined. Based on this, the development status and determinants of enterprise digital applications and the impact of digitalization on enterprise performance are discussed. Thus, by analyzing the panel data of these companies, the relationship among the age of the enterprise, the knowledge level of the board of directors, the proportion of fixed assets, the company’s assets, and the degree of enterprise digitalization are evaluated. At last, according to the evaluated results, the relationship between the degree of digitalization and the performance of enterprises is analyzed. In this article, our analysis helps to solve the “IT production paradox” problem, and also to provides data and theoretical support for digitalization to improve corporate performance to a certain extent. Furthermore, the digitalization measurement variable laid out in this article provides a foundation for future research on the relationship between digitalization and corporate performance.