Enterprise Digital Transformation and Stock Price Crash Risk: Evidences from China

Abstract

With unstoppable rise of digital economy globally, digital transformation has become an inevitable choice for enterprises to survive and develop; both the public and the government are paying increasing attention to digital transformation. At the same time, the Chinese government takes more serious attitude towards systemic financial risks, emphasizing the importance of controlling systemic risks such as abnormal stock price in many public occasions. In this context, enterprise digital transformation and stock price crash risk have gained unprecedented attention. It is of great value for both industry and the government to analyze the influence and mechanism of enterprise digital transformation (EDT) on stock price crash risks. This study measures the degree/level of EDT of Chinese A-share publicly owned enterprises through document study and crawler technology, examining the influence and mechanism of digital transformation on companies’ stock price crash risk. Conclusions of this paper may provide a theoretical and empirical basis for understanding digital transformation's consequences in capital market and provide a reference for the government and regulatory authorities to formulate support and disclosure policies for digital transformation.