Digital transformation and accounting information quality: The role of environmental uncertainty in the era of digital

Zhenjie Li, Jie Han, Xiaoyan Sun and Lihan Cheng

International Review of Economics & Finance, 2025, vol. 103, issue C

Abstract: Amid accelerating digitalization, we examine how digital transformation (DT) shapes accounting information quality (AIQ) through environmental uncertainty (EU), and how innovation investment (R&D) and industry competition (PMC) condition these effects. Using 19,925 firm-year observations for Chinese A-share firms (2013–2022), we construct a text-mined DT index with entropy weights, proxy AIQ via discretionary accruals from a modified Jones model, and measure EU with industry-adjusted rolling residual volatility. Firm and year fixed-effects regressions show: (1) DT significantly improves AIQ by reducing earnings management; (2) EU partially mediates the DT–AIQ link, as DT lowers EU and, in turn, curbs managerial opportunism; (3) R&D and PMC jointly exhibit non-linear moderation, forming an inverted U-shaped pattern whereby DT's uncertainty-reduction benefits peak under moderate competition and balanced innovation. Robustness checks with alternative measures, lags, and clustering support these results. Theoretically, we reveal a novel transmission channel—DT reduces EU to enhance AIQ—extending research on uncertainty and information production. Practically, firms should pursue holistic DT and disciplined R&D to strengthen reporting quality, while regulators enhance digital infrastructure and disclosure standards to improve market transparency and investor protection.

Keywords: Digital transformation; Accounting information quality; Environmental uncertainty; Innovation investment; Industry competitive intensity (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:103:y:2025:i:c:s1059056025007518

DOI: 10.1016/j.iref.2025.104588

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