Digitalize and stabilize: corporate digital transformation and performance volatility

Jianrong Wang, Wenjia Li, Bo Wang and Zhenyuan Wang

Applied Economics, 2025, vol. 57, issue 55, 9345-9359

Abstract: Digital transformation has emerged worldwide as a defining element of corporate strategies, driven by the rapid evolution of technologies. Understanding how digital transformation impacts firm performance and uncovering its underlying mechanisms has become essential for both theoretical exploration and practical application. This study investigates the impact of corporate digital transformation on performance volatility. We find that digitalization significantly attenuates firm performance fluctuations. This effect is primarily attributable to the synergistic interplay of strategic guidance, organizational empowerment, environmental support, and digital achievement. We show that digital transformation enhances performance stability by reducing information asymmetry between firms and their stakeholders. Our results indicate that these stabilizing effects are particularly pronounced in state-owned enterprises. The results are robust after addressing endogeneity concerns. This research contributes to the discourse on digital transformation strategies and their implications for corporate performance and risk management in emerging markets.

Date: 2025
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DOI: 10.1080/00036846.2024.2416090

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