Hear all parties: Peer effect of digital transformation on long‐term firm investment in China

Abstract

AbstractThis study explores the increasing significance of digital transformation and its peer effects as key factors influencing the efficiency of long‐term firm investment. A complete digital transformation dictionary is established in this study containing 179 keywords; the frequency of digital‐transformation‐related words is determined using textual mining technology and a reverse maximum matching algorithm. The effects of digital transformation, including peer effect, on long‐term firm investment are investigated using firm‐level panel data analysis. Our empirical findings demonstrate an increase in firms' digital transformation from 2011 to 2020. Digital transformation appears to significantly reduce long‐term firm investment. Industrial peers' digital transformation prohibits a focal firm's long‐term investment, marking a noteworthy divergence from the financial heterogeneous features of focal and peer firms. The digital transformation of industrial peers positively affects the long‐term investment of focal firms by promoting an equity investment structure and an asset‐light operation strategy.