Digital transformation and enterprise inefficient investment: Under the view of financing constraints and earnings management

Abstract

In the context of the digital age, digital transformation provides new inspiration and direction for enterprise investment. This paper examines the potential mechanisms through which digital transformation affects corporate inefficient investment with the data from 2011 to 2019 of Chinese listed enterprises. Specifically, the findings indicate that digital transformation effectively curbs underinvestment by alleviating the pressure of financing constraints and inhibits overinvestment through regulating earnings management. Further analysis of the heterogeneity of industrial difference and property right unveil that the inhibitory effect of digital transformation on underinvestment and overinvestment in non-state-owned and manufacturing enterprises is more substantial than that in state-owned and non-manufacturing enterprises. These findings provide some insights for enterprises to optimize investment decisions by promoting digital transformation.