Digital transformation and corporate performance: evidence from China

Abstract

ABSTRACT This study measures the enterprise digitalization index and investigates the relationship between digital transformation and corporate performance. The rapid development of digital technologies has transformed enterprise in significant ways. The main challenge in examining the impact of digital transformation is the lack of firm-level data. We use the method of text analysis to construct an enterprise digitalization index based on annual reports of listed companies in China during 2012–2018. We find that Enterprise digital transformation improves corporate performance. This holds in particular for non-state-owned firms and companies from service industries. Moreover, digital transformation enhances corporate performance by improving employee efficiency. The findings offer important policy implications for promoting digital economy in China.