The research on non-linear relationship between enterprise digital transformation and stock price crash risk

Yongfang Ai, Zheng Chi, Guanglin Sun, Han Zhou and Tao Kong

The North American Journal of Economics and Finance, 2023, vol. 68, issue C

Abstract: This paper uses data from Chinese A-share listed enterprises to examine digital transformation’s impact and intrinsic mechanisms on the risk of stock price collapse. This paper finds that the impact of digital transformation on the risk of stock price collapse follows an inverted U-shaped trend characterized by initial exacerbation followed by subsequent suppression. Furthermore, we find that as most Chinese enterprises are still positioned at the left end of the inverted U-shaped curve in terms of their level of digital transformation, the impact of digital transformation on the risk of the stock price collapse is mainly characterized by exacerbation. Moreover, we discover that digital transformation influences the risk of stock price collapse by increasing agency costs and fostering managerial overconfidence. Lastly, the heterogeneity analysis results indicate that digital transformation’s impact on the risk of stock price collapse varies among different types of enterprises. The exacerbation effect of the former on the latter is primarily observed in small-sized and non-high-tech enterprises. Additionally, as the digital transformation progresses, large-sized enterprises and high-tech enterprises can benefit more rapidly from its positive empowering effects.

Keywords: Digital transformation; Stock price crash; Inverse U-shape; Agency cost; Overconfidence (search for similar items in EconPapers)
JEL-codes: G14 G34 L22 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecofin:v:68:y:2023:i:c:s1062940823001079

DOI: 10.1016/j.najef.2023.101984

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