Digital Transformation And Stock Price Idiosyncratic Fluctuation

Nowadays,digital technologies,such as Big Data,Cloud Computing,the Internet of Things,and Blockchain,continue to be iterated,upgraded and innovated.The deep integration of digital economy and entity enterprises has always been an important development direction in the era of digital economy.14 th Five Year Plan pointed out the need to build digital industrial clusters with international competitiveness.Digital economy is becoming an important force leading China’s sustained and high-quality economic and social development.Especially since the outbreak of COVID-19,new models of digital economy,such as “Cloud Office”,“Tencent Conference” and“Intelligent Manufacturing”,have provided new ideas for enterprises to get rid of operating difficulties and gain competitive advantages.According to the data released by CAICT,the scale of China’s digital economy has increased by three times from 2012 to2021,and reached 45.5 trillion yuan,which accounts for 39.8% of the gross national product.The growth rate is 3.4 percentage points higher than nominal GDP growth over the same period The digital economy is playing a more prominent role in promoting stability and quality in the national economy.As the digital economy grows rapidly,more and more enterprises promote the digital transformation in order to cater to the general trend of digital development obtain new development opportunities.Digital transformation endows firms with new vitality for development,which will be reflected to some extent by stock price fluctuations in the capital market.This paper links digital transformation with idiosyncratic volatility in stock prices and further explores the relationship and mechanism.Based on the above background,this paper takes all A-share companies listed in Shanghai and Shenzhen Stock exchanges from 2007 to 2020 as research samples,and uses two-way fixed effect model and intermediary effect model to test the influence of digital transformation on stock price idiosyncratic fluctuation and its action channels.It empirically tests the impact of digital transformation on stock price idiosyncratic fluctuation and its mechanism.It is found that the digital transformation of enterprises can improve the information quality of the capital market,reduce the future uncertainty of the company,and thus help to reduce the idiosyncratic volatility of the stock price.The results remain true after endogenetic treatment and a series of other robustness tests.Mechanism analysis shows that the digital transformation of enterprises can reduce stock price idiosyncratic fluctuation in two ways: improving the quality of information,and improve the internal control of the company.The digital transformation can significantly improve the quality of information and the asymmetry of information,further reduce the idiosyncrasies of stock prices.The idiosyncratic volatility of stock price can also be alleviated by improving the quality of internal control.Heterogeneity analysis shows that the negative correlation between the two is more significant in non-state-owned enterprises,high-tech companies and firms with high media attention.In addition,it also helps to further open the black box between digital transformation and stock price idiosyncratic volatility,and enrich the literature related to digital transformation and capital market information efficiency.