Digital transformation and firm boundary reshaping: based on the dispersion of subsidiaries†

Yuetong Chen, Liuchuang Li, Jinghui Sun and Zhicheng Xiao

Asia-Pacific Journal of Accounting & Economics, 2025, vol. 32, issue 5, 948-969

Abstract: The existing literature on digital transformation primarily focuses on its economic implications, with limited understanding of its impact on firm boundaries. In our study, we examine a sample of China-listed firms from 2007 to 2021 and find that digitization significantly expands firm boundaries by reducing management costs and enhancing labor efficiency. This positive effect is more pronounced in firms with higher internal control and external transaction costs. Furthermore, digital transformation also extends industry boundaries. We also observe that companies with higher levels of digitization tend to establish more subsidiaries annually and in regions with higher transaction costs.

Date: 2025
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DOI: 10.1080/16081625.2024.2443855

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Asia-Pacific Journal of Accounting & Economics is currently edited by Yin-Wong Cheung, Hong Hwang, Jeong-Bon Kim, Shu-Hsing Li and Suresh Radhakrishnan

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