Does digital transformation speed up dynamic capital structure adjustment? Evidence from China

Yuhao Niu, Sai Wang, Wen Wen and Sifei Li

Pacific-Basin Finance Journal, 2023, vol. 79, issue C

Abstract: This paper examines whether and how digital transformation impacts capital structure adjustment speed. We find that digital transformation speeds up capital structure adjustment. Furthermore, digital transformation can improve the probability of leverage upward (downward) adjustment by issuing debts and dividends (issuing equities and repaying debts). Channel tests show that reducing information asymmetry, mitigating agency problems, and alleviating financial constraints are possible mechanisms. Cross-sectional tests show that the findings are more pronounced for firms in highly competitive industries, located in provinces with high level of market development, and in years of high economic policy uncertainty.

Keywords: Digital transformation; Capital structure adjustment speed; Information asymmetry; Corporate governance; Financial constraints (search for similar items in EconPapers)
JEL-codes: D21 G30 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 (20)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:pacfin:v:79:y:2023:i:c:s0927538x23000823

DOI: 10.1016/j.pacfin.2023.102016

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