Research On The Impact Of Digital Transformation On Enterprise Performance

At present,China’s economy has shifted from the stage of high speed growth to the stage of high quality development.High-quality development is manifested at the macro level as high-quality economic development and at the micro level as high-quality enterprise development,which is the premise and foundation of high-quality economic development.As an important part of economic development,enterprises are an important force in achieving quality development in China’s economy.However,due to the outbreak and spread of the new global epidemic and the uncertainty of the foreign economic environment,the performance of domestic enterprises,especially small and medium-sized enterprises,has declined sharply and they are even on the verge of bankruptcy,so they need to seek new development paths and development models.Against this backdrop,the 14 th Five-Year Plan of the National Economic and Social Development of the People’s Republic of China and the Outline of Vision 2035 proposed to create new advantages in the digital economy,promote the deep integration of digital technology with the real economy,and empower traditional industries to transform and upgrade.This provides a new way of thinking for the future development of enterprises-digital transformation.However,there is no unified consensus in the academic community on the relationship between digital transformation and enterprise performance.While one side believes that digital transformation can bring about a digital dividend and improve business performance,the other side believes that digital transformation can exacerbate the digital divide and inhibit business performance.The intricate relationship between digital transformation and business performance is a "puzzle" to be solved.Based on national strategic guidance and enterprise development needs,this paper proposes to construct a panel data of A-share listed enterprises in Shanghai and Shenzhen from2007 to 2019,and subdivide enterprise performance into two dimensions: enterprise main business performance and enterprise market value,to conduct a systematic study on digital transformation and enterprise performance,focusing on four major questions: How does digital transformation affect enterprise performance? What are the drivers of the effectiveness of digital transformation? What are the transmission mechanisms through which digital transformation affects business performance? How can the positive(negative)effects of digital transformation be reinforced(governed)? By examining these four progressive questions in depth,this paper draws the following core conclusions.First,at an aggregate level,digital transformation significantly contributes to the performance and market value of a company’s primary business.The positive driving effect is even more pronounced when the level of digital transformation is high.In particular,digital transformation is broken down into "ABCD" underlying technologies and digital technologies such as Artificial Intelligence,Blockchain,Cloud Computing and Big Data.The practical application of the underlying "ABCD" technologies and digital technologies was found to promote the performance and market value of the main business,but the promotion effect of digital technologies was more significant.Further,in terms of the nature of enterprises,digital transformation has a more significant effect on the main business performance and market value of state-owned enterprises than non-state-owned enterprises;in terms of industry attributes,digital transformation has a more significant effect on the main business performance and market value of technology-intensive enterprises,followed by capital-intensive enterprises;in terms of geographical attributes,digital transformation has a more significant effect on the main business performance and market value of enterprises in the eastern region than in the central and western regions.From the perspective of enterprise life cycle,digital transformation has a more significant effect on the performance and market value of enterprises’ main business compared with those in the growth and decline phases,followed by those in the growth phase.Second,in terms of motivational mechanisms,firstly,the heterogeneity of the executive team has a significant impact on the digital transformation of enterprises.The higher the heterogeneity of the executive team in terms of age,the lower the degree of digital transformation;the higher the heterogeneity of the executive team in terms of educational background,professional background and overseas background,the higher the degree of digital transformation.Secondly,executive team heterogeneity affects digital transformation mainly through information disclosure,financial leverage and willingness to innovate.In particular,the higher the age heterogeneity of the executive team,the lower the quality of internal control disclosure and the higher the level of financial leverage,as well as the relative lack of willingness to innovate,which inhibits the digital transformation of enterprises;the higher the heterogeneity of the executive team’s educational background,the heterogeneity of the executive team’s professional background and the heterogeneity of the executive team’s overseas background,the higher the quality of internal control disclosure,the lower the level of financial leverage and the higher the willingness to innovate,which Helping enterprises to transform digitally.Thirdly,from the perspective of the transmission mechanism,firstly,digital transfor-mation can break through geographical boundaries with the help of digital technology to obtain external market information and keep an eye on market development trends,unlocking the information flow channels between enterprises and the outside world,gaining the attention of analysts,positive press and online news reports,and making investors and financial institutions take a positive attitude towards the prospects of enterprises,thus helping enterprises to improve their main business performance and market value.Secondly,digital transformation relies on "ABCD" technology to help enterprises alleviate information asymmetry,broaden their external financing channels,reduce their financing costs,improve their internal management mechanisms,discourage speculative motives and optimism their financial behaviour,thus helping them to improve their main business performance and market value.Finally,digital transformation relies on cutting-edge technologies such as big data,cloud computing and blockchain,which can visualize and analyse data and optimism corporate decision-making strategies,improve internal resource allocation efficiency,reduce resource wastage,inject capital into R&D and innovation projects,and improve corporate innovation output through intelligent and digital production methods,thereby enhancing corporate performance and market value.Fourth,in terms of moderating effects,in the group of corporate management variables,the better the digital transformation of a company,whether the bank holds shares in the company or the company holds shares in the bank,the better the digital transformation of the company,the better the performance of the company’s main business and the increase in market value.The stronger the managerial capacity of the company,the better the digital transformation will be,which in turn will boost the performance of the company’s main business and market value.In the market environment variable group,uncertainty in monetary policy,uncertainty in fiscal policy,the rule of law environment and increased protection of intellectual property rights all significantly enhance the effect of digital transformation on the performance and market value of a company’s main business.In the government behaviour variable group,an increase in the degree of fiscal imbalance of local governments significantly weakens the effect of digital transformation on the market value of enterprises;in contrast,an increase in the financial autonomy of local governments and the intensity of government subsidies significantly strengthens the positive effect of digital transformation on the performance and market value of enterprises’ main businesses.This paper explores the impact of digital transformation on the performance and market value of a firm’s main business and the underlying mechanisms,based on a delineation of firm performance measures,and provides new evidence for identifying the economic performance of digital transformation.In particular,this paper examines the mechanism of digital transformation on enterprise performance,firstly,it explores the dynamics and underlying mechanisms of digital transformation,and then identifies the transmission mechanism of digital transformation on enterprise performance.At the same time,the paper goes beyond the existing research findings to examine the question of "how to strengthen the positive effects of digital transformation".The aim of this paper is to develop a comprehensive’driver-conductor-enhancement(governance)’ mechanism that provides detailed empirical evidence for a deeper understanding of how digital transformation affects business performance.The policy recommendations in this paper can help inform the decisions of government departments to promote the integration of the digital economy with the real economy,and provide empirical evidence for enterprises to improve the quality and effectiveness of digital transformation.