The risk effects of corporate digitalization: exacerbate or mitigate?

Kangqi Jiang, Lulu Chen, Jiayun Li and Xinyi Du ()
Additional contact information
Kangqi Jiang: Shantou University
Lulu Chen: Shantou University
Jiayun Li: Shantou University
Xinyi Du: Jinan University

Palgrave Communications, 2025, vol. 12, issue 1, 1-19

Abstract: Abstract This study elaborates on the risk effects of corporate digital transformation (CDT). Using the ratio of added value of digital assets to total intangible assets as a measure of CDT, this study overall reveals an inverse relationship between CDT and revenue volatility, even after employing a range of technical techniques to address potential endogeneity. Heterogeneity analysis highlights that the firms with small size, high capital intensity, and high agency costs benefit more from CDT. It also reveals that advancing information infrastructure, intellectual property protection, and digital taxation enhances the effectiveness of CDT. Mechanism analysis uncovers that CDT not only enhances financial advantages such as bolstering core business and mitigating non-business risks but also fosters non-financial advantages like improving corporate governance and ESG performance. Further inquiries into the side effects of CDT and the dynamics of revenue volatility indicate that CDT might compromise cash flow availability. Excessive digital investments exacerbate operating risks. Importantly, the reduction in operating risk associated with CDT does not sacrifice the potential for enhanced company performance; rather, it appears to augment the value of real options.

Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
http://link.springer.com/10.1057/s41599-025-04628-y Abstract (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pal:palcom:v:12:y:2025:i:1:d:10.1057_s41599-025-04628-y

Ordering information: This journal article can be ordered from
https://www.nature.com/palcomms/about

DOI: 10.1057/s41599-025-04628-y

Access Statistics for this article

More articles in Palgrave Communications from Palgrave Macmillan
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().