Corporate digital transformation and idiosyncratic risk: Based on corporate governance perspective

Heshu Huang, Caiting Wang, Liukai Wang and Larisa Yarovaya

Emerging Markets Review, 2023, vol. 56, issue C

Abstract: This study examines the relationship between corporate digital transformation and idiosyncratic risk. We employ crawler technology to gather “digital transformation” characteristic words in annual reports, and innovatively construct a proxy variable for corporate digital transformation. Using 12,516 observations from 2941 listed companies in China across the period 2014 to 2020, we find that the relationship between corporate digital transformation and idiosyncratic risk presents as “U-shaped”. The results are still robust when we address the endogeneity concern, and use alternative measures of the dependent variable, further validate the U-shaped relationship as well as exclude special samples. The moderating effect of management shareholding and product market competition is further explored from internal and external corporate governance mechanisms, respectively. Results show that internal and external corporate governance mechanisms strengthen the relationship between digital transformation and idiosyncratic risk. In general, our research results enrich the study of corporate digital transformation and risk management, which gives some insight into corporate governance in the digital age.

Keywords: Digital transformation; Idiosyncratic risk; Corporate governance; Textual analysis (search for similar items in EconPapers)
JEL-codes: D21 G32 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ememar:v:56:y:2023:i:c:s156601412300050x

DOI: 10.1016/j.ememar.2023.101045

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