Enterprise digital transformation and debt financing cost in China?s A-share listed companies
DOI:
https://doi.org/10.24136/oc.2022.023Keywords:
digital transformation, digital economy, debt financing cost, information asymmetry, agency problemAbstract
Research background: The rapid development of digital economy has set off a new wave of enterprise reform. Developing the digital economy is not only an urgent requirement of the current situation, but also an important way to meet the people's better life.
Purpose of the article: This paper attempts to reveal the important role of the development of digital technology on the debt financing cost of micro enterprises, and provide micro evidence for the integration of digital economy and real economy. At the same time, this paper wants to provide relevant guidance for formulating digital related policies and reducing the financing cost of the real economy.
Methods: Taking China?s A-share listed companies from 2007 to 2020 as a sample, this paper empirically tests the impact of enterprise digital transformation on debt financing cost and its mechanism. In the robustness test, this paper uses the measures of changing independent variables and dependent variables, instrumental variable method and quantile regression method. In the mechanism test, this paper uses the intermediary effect model. In the further study, this paper uses the method of group regression.
Findings & value added: The study finds that the digital transformation of enterprises significantly reduces the cost of debt financing. Mechanism tests show that the role of enterprise digital transformation in reducing debt financing costs is mainly realized by reducing information asymmetry and alleviating agency problems. Further tests show that the relationship between enterprise digital transformation and debt financing cost is affected by the degree of market competition, whether it is a high-tech enterprise and audit quality. When the degree of market competition is high, the enterprise is a high-tech one, or it is audited by the four major international accounting firms, the effect of enterprise digital transformation on the reduction of debt financing cost is more significant. The method used in this paper is also applicable to the study of other economic management problems. This paper proves a positive significance of digital transformation, which is conducive to promoting the digital transformation of enterprises. Especially for those enterprises in non-high-tech industries, they should speed up the pace. At the same time, this paper has a certain guiding role for the introduction and implementation of policies to encourage digital transformation.
Downloads
References
Acemoglu, D. (2003). Labor- and capital-augmenting technical change. Journal of the European Economic Association, 1(1), 1?37. doi: 10.1162/1542476033222 56756.
DOI: https://doi.org/10.1162/154247603322256756
View in Google Scholar
Adner, R., Puranam, P., & Zhu, F. (2019). What is different about digital strategy? from quantitative to qualitative change. Strategy Science, 4(4), 253?261. doi: 10.1287/stsc.2019.0099.
DOI: https://doi.org/10.1287/stsc.2019.0099
View in Google Scholar
Amankwah-Amoah, J., Khan, Z., Wood, G., & Knight, G. (2021). COVID-19 and digitalization: the great acceleration. Journal of Business Research, 136, 602?611. doi: 10.1016/j.jbusres.2021.08. 011.
DOI: https://doi.org/10.1016/j.jbusres.2021.08.011
View in Google Scholar
Anderson, R. C., Mansi, S. A., & Reeb, D. M. (2004). Board characteristics, ac-counting report integrity, and the cost of debt. Journal of Accounting & Economics, 37(3), 315?42. doi: 10.1016/j.jacceco.2004.01.004.
DOI: https://doi.org/10.1016/j.jacceco.2004.01.004
View in Google Scholar
Ang, J. S., Cole, R. A., & Lin, J. W. (2000). Agency costs and ownership structure. Journal of Finance, 55(1), 81?106. doi: 10.1111/0022-1082.00201.
DOI: https://doi.org/10.1111/0022-1082.00201
View in Google Scholar
Barnes, S. J. (2020). Information management research and practice in the post-COVID-19 world. International Journal of Information Management, 55, 102175. doi: 10.1016/j.ijinfomgt.2020. 102175.
DOI: https://doi.org/10.1016/j.ijinfomgt.2020.102175
View in Google Scholar
Bednar, M. K. (2012). Watchdog or lapdog? A behavioral view of the media as a corporate governance mechanism. Academy of Management Journal, 55(1), 131?150. doi: 10.5465/amj.2009.0862.
DOI: https://doi.org/10.5465/amj.2009.0862
View in Google Scholar
Bednar, M. K., Boivie, S., & Prince, N. R. (2013). Burr under the saddle: how media coverage influences strategic change. Organization Science, 24(3), 910?925. doi: 10.1287/orsc.1120.0770.
DOI: https://doi.org/10.1287/orsc.1120.0770
View in Google Scholar
Bergh, D. D., Connelly, B. L., Jr, D. J. K., & Lu, M. S. (2014). Signaling theory and equilibrium in strategic management research: an assessment and a research agenda. Journal of Management Studies, 51(8), 1334?1360. doi: 10.1111/joms.12097.
DOI: https://doi.org/10.1111/joms.12097
View in Google Scholar
Bergstresser, D., & Philippon, T. (2006). CEO incentives and earnings manage-ment. Journal of Financial Economics, 80(3), 511?529. doi: 10.1016/j.jfineco.2 004.10.011.
DOI: https://doi.org/10.1016/j.jfineco.2004.10.011
View in Google Scholar
Berman, S. J. (2012). Digital transformation: opportunities to create new business models. Strategy & Leadership, 40(2), 16?24. doi: 10.1108/10878571211209 314.
DOI: https://doi.org/10.1108/10878571211209314
View in Google Scholar
Bharath, S. T., Sunder, J., & Sunder, S. V. (2008). Accounting quality and debt contracting. Accounting Review, 83(1), 1?28. doi: 10.2308/accr.2008.83.1.1.
DOI: https://doi.org/10.2308/accr.2008.83.1.1
View in Google Scholar
Bhojraj, S., & Sengupta, P. (2003). Effect of corporate governance on bond ratings and yields: the role of institutional investors and outside directors. Journal of Business, 76(3), 455?475. doi: 10.1086/344114.
DOI: https://doi.org/10.1086/344114
View in Google Scholar
Bhushan, R. (1989). Firm characteristics and analyst following. Journal of Accounting and Economics, 11(2-3), 255?275. doi: 10.1016/0165-4101(89)90 008-6.
DOI: https://doi.org/10.1016/0165-4101(89)90008-6
View in Google Scholar
Boubakri, N., & Ghouma, H. (2010). Control/ownership structure, creditor rights protection, and the cost of debt financing: international evidence. Journal of Banking & Finance, 34(10), 2481?2499. doi: 10.1016/j.jbankfin.2010.04.006.
DOI: https://doi.org/10.1016/j.jbankfin.2010.04.006
View in Google Scholar
Bradley, M., & Chen, D. (2011). Corporate governance and the cost of debt: evi-dence from director limited liability and indemnification provisions. Journal of Corporate Finance, 17(1), 83?107. doi: 10.1016/j.jcorpfin.2010.08.001.
DOI: https://doi.org/10.1016/j.jcorpfin.2010.08.001
View in Google Scholar
Brynjolfsson, E., & McElheran, K. (2016). The rapid adoption of data-driven deci-sion-making. American Economic Review, 106(5), 133?139. doi: 10.1257/aer .p2 0161016.
DOI: https://doi.org/10.1257/aer.p20161016
View in Google Scholar
Caserio, C., Panaro, D., & Trucco, S. (2019). Management discussion and analysis: a tone analysis on US financial listed companies. Management Decision, 58(3), 510?525. doi: 10.1108/MD-10-2018-1155.
DOI: https://doi.org/10.1108/MD-10-2018-1155
View in Google Scholar
Cenamor, J., Parida, V., & Wincent, J (2019). How entrepreneurial SMEs compete through digital platforms: the roles of digital platform capability, network ca-pability and ambidexterity. Journal of Business Research, 100, 196?206. doi: 10.1016/j.jbusres.2019.03.035.
DOI: https://doi.org/10.1016/j.jbusres.2019.03.035
View in Google Scholar
Cennamo, C., & Santalo, J. (2019). Generativity tension and value creation in platform ecosystems. Organization Science, 30(3), 617?641. doi: 10.1287/orsc.2 018.1270.
DOI: https://doi.org/10.1287/orsc.2018.1270
View in Google Scholar
Chen, P. Y., & Hao, Y. Y. (2022). Digital transformation and corporate environ-mental performance: the moderating role of board characteristics. Corporate Social Responsibility and Environmental Management, 29(5), 1?11. doi: 10.10 02/csr.2324.
DOI: https://doi.org/10.1002/csr.2324
View in Google Scholar
Cho, H., & Muslu, V. (2021). How do firms change investments based on MD&A disclosures of peer firms? Accounting Review, 96(2), 177?204. doi: 10.2308/ TAR-2017-0646.
DOI: https://doi.org/10.2308/TAR-2017-0646
View in Google Scholar
Core, J. E., Guay, W. R., & Verrecchia, R. E. (2003). Price versus non-price performance measures in optimal CEO compensation contracts. Accounting Review, 78(4), 957?981. doi: 10.2308/accr.2003.78.4.957.
DOI: https://doi.org/10.2308/accr.2003.78.4.957
View in Google Scholar
Cusumano, M. A., Gawer, A., & Yoffie, D. B. (2019). The business of platforms: strategy in the age of digital competition, innovation, and power (pp. 1?309). New York: Harper Business.
View in Google Scholar
Dyck, A., Volchkova, N., & Zingales, L. (2008). The corporate governance role of the media: evidence from Russia. Journal of Finance, 63(3), 1093?1135. doi: 10.1111/j.1540-6261.2008.01353.x.
DOI: https://doi.org/10.1111/j.1540-6261.2008.01353.x
View in Google Scholar
Earley, S. (2014). The digital transformation: staying competitive. IT Professional, 16(2), 58?60. doi: 10.1109/mitp.2014.24.
DOI: https://doi.org/10.1109/MITP.2014.24
View in Google Scholar
Elyasiani, E., Jia, J. Y., & Mao, C. X. (2010). Institutional ownership stability and the cost of debt. Journal of Financial Markets, 13(4), 475?500. doi: 10.1016/j.f inmar.2010.05.001.
DOI: https://doi.org/10.1016/j.finmar.2010.05.001
View in Google Scholar
Ertugrul, M., Lei, J., Qiu, J., & Wan, C. (2017). Annual report readability, tone am-biguity, and the cost of borrowing. Journal of Financial and Quantitative Analysis, 52(2), 811?836. doi: 10.1017/ s0022109017000187.
DOI: https://doi.org/10.1017/S0022109017000187
View in Google Scholar
Fama, E. F., & Jensen, M. C. (1983). Separation of ownership and control. Journal of Law & Economics, 26(2), 301?325. doi: 10.1086/467037.
DOI: https://doi.org/10.1086/467037
View in Google Scholar
Gao, F. X, Lin, C., & Zhai, H.M. (2022). Digital transformation, corporate innova-tion, and international strategy: empirical evidence from listed companies in China. Sustainability, 14(13), 1?19. doi: 10.3390/su14138137.
DOI: https://doi.org/10.3390/su14138137
View in Google Scholar
Ghosh, S., Hughes, M., Hodgkinson, I., & Hughes, P. (2022). Digital transformation of industrial businesses: a dynamic capability approach. Technovation, 113, 102414. doi: 10.1016/j.technovation. 2021.102414.
DOI: https://doi.org/10.1016/j.technovation.2021.102414
View in Google Scholar
Gilliland, D. I., Bello, D. C., & Gundlach, G. T. (2010). Control-based channel gov-ernance and relative dependence. Journal of the Academy of Marketing Sci-ence, 38, 441?455. doi: 10.1007/s11747-009-0183-8.
DOI: https://doi.org/10.1007/s11747-009-0183-8
View in Google Scholar
Gul, F. A., Kim, J., & Qiu, A. A. (2010). Ownership concentration, foreign share-holding, audit quality, and stock price synchronicity: evidence from China. Journal of Financial Economics, 95(3), 425?442. doi: 10.1016/j.jfineco.20 09.11. 005.
DOI: https://doi.org/10.1016/j.jfineco.2009.11.005
View in Google Scholar
Huang, A. H., Zang, A. Y., & Zheng, R. (2014). Evidence on the information con-tent of text in analyst reports. Accounting Review, 86(6), 2151?2180. doi: 10.2139/ ssrn.1888724.
DOI: https://doi.org/10.2308/accr-50833
View in Google Scholar
Healy, P. M. (1985). The effect of bonus schemes on accounting decisions. Jour-nal of Accounting & Economics, 7(1-3), 85?107. doi: 10.1016/0165-4101 (85)90029-1.
DOI: https://doi.org/10.1016/0165-4101(85)90029-1
View in Google Scholar
Ionescu, A. M., Clipa, A.-M., Turnea, E.-S., Clipa, C.-I., Bedrule-Grigoru?ă, M. V., & Roth, S. (2022). The impact of innovation framework conditions on corpo-rate digital technology integration: institutions as facilitators for sustainable digital transformation. Journal of Business Economics and Management. Ad-vance online publication. doi: 10.3846/jbem.2022.17039.
DOI: https://doi.org/10.3846/jbem.2022.17039
View in Google Scholar
Jaffee, D. M., & Russell, T. (1976). Imperfect information, uncertainty, and credit rationing. Quarterly Journal of Economics, 90(4), 651?666. doi: 10.2307/1885 327.
DOI: https://doi.org/10.2307/1885327
View in Google Scholar
Jensen, M. C., & Meckling, W. H. (1976). Theory of firm - managerial behavior, agency costs and ownership structure. Journal of Financial Economics, 3(4), 305?360. doi: 10.1016/0304-405x(76)90026-x.
DOI: https://doi.org/10.1016/0304-405X(76)90026-X
View in Google Scholar
Jiang, F., Kim, K. A., Ma, Y., Nofsinger, J. R., & Shi, B. (2019). Corporate culture and investment?cash flow sensitivity. Journal of Business Ethics, 154(2), 425?439. doi: 10.1007/s10551-017-3444-3.
DOI: https://doi.org/10.1007/s10551-017-3444-3
View in Google Scholar
Kretschmer, T., & Khashabi, P. (2020). Digital transformation and organization design. California Management Review, 62(4), 1?19. doi: 10.1177/00081256 20940296.
DOI: https://doi.org/10.1177/0008125620940296
View in Google Scholar
Kyaw, K., Olugbode, M., & Petracci, B. (2022). Stakeholder engagement: investors' environmental risk aversion and corporate earnings. Business Strategy and the Environment, 31(3), 1220?1231. doi: 10.1002/bse.2951.
DOI: https://doi.org/10.1002/bse.2951
View in Google Scholar
Lang, M. H., Lins, K. V., & Miller, D. P. (2003). ADRs, analysts, and accuracy: does cross listing in the United States improve a firm's information environ-ment and increase market value? Journal of Accounting Research, 41(2), 317?345. doi: 10.1111/1475-679X.00106.
DOI: https://doi.org/10.1111/1475-679X.00106
View in Google Scholar
Li, F. (2020). The digital transformation of business models in the creative industries: a holistic framework and emerging trends. Technovation, 92-93, 102012. doi: 10.1016/j.technovation.2017. 12.004.
DOI: https://doi.org/10.1016/j.technovation.2017.12.004
View in Google Scholar
Li, M., Wu, H., Xiao, M., & You, J. (2019). Beyond cheap talk: management?s informative tone in corporate disclosures. Accounting & Finance, 59(5), 2905?2959. doi: 10.1111/acfi.12554.
DOI: https://doi.org/10.1111/acfi.12554
View in Google Scholar
Lichtenberg, F., & Palia, D., (1999). Managerial ownership and firm performance: a reexamination using productivity measurement. Journal of Finance, 52(3), 1240?1240. doi: 10.1016/S0929-1199(99)00009-7.
DOI: https://doi.org/10.1016/S0929-1199(99)00009-7
View in Google Scholar
Liu, B., & McConnell, J. J. (2013). The role of the media in corporate governance: do the media influence managers' capital allocation decisions? Journal of Financial Economics, 110(1), 1?17. doi: 10.2139/ssrn.2004567.
DOI: https://doi.org/10.1016/j.jfineco.2013.06.003
View in Google Scholar
Loughran, T., & McDonald, B. (2020). Textual analysis in finance. Annual Review of Financial Economics, 12, 357?375. doi: 10.1146/annurev-financial-012820-032249.
DOI: https://doi.org/10.1146/annurev-financial-012820-032249
View in Google Scholar
Loughran, T., & McDonald, B. (2011). When is a liability not a liability? Textual analysis, dictionaries, and 10-Ks. Journal of Finance, 66(1), 35?65. doi: 10.11 11/j.1540-6261.2010.01625.x.
DOI: https://doi.org/10.1111/j.1540-6261.2010.01625.x
View in Google Scholar
Matt, C., Hess, T., & Benlian, A. (2015). Digital transformation strategies. Business & Information Systems Engineering, 57(5), 339?343. doi: 10.1007/s1 2599-015-0401-5
DOI: https://doi.org/10.1007/s12599-015-0401-5
View in Google Scholar
Meng, S., Su, H., & Yu, J. (2022). Digital transformation and corporate social per-formance: how do board independence and institutional ownership matter? Frontiers in Psychology, 13, 1?14. doi: 10.3389/fpsyg.2022.915583.
DOI: https://doi.org/10.3389/fpsyg.2022.915583
View in Google Scholar
Minnis, M. (2011). The value of financial statement verification in debt financing: evidence from private US firms. Journal of Accounting Research, 49(2), 457?506. doi: 10.1111/j.1475-679X.2011.00411.x.
DOI: https://doi.org/10.1111/j.1475-679X.2011.00411.x
View in Google Scholar
Orlitzky, M., Louche, C. Gond, J., & Chapple, W. (2017). Unpacking the drivers of corporate social performance: a multilevel, multistakeholder, and multimethod analysis. Journal of Business Ethics, 144(1), 21?40. doi: 10.1007/s10551-015-2822-y.
DOI: https://doi.org/10.1007/s10551-015-2822-y
View in Google Scholar
Peng, Y., & Tao, C. (2022). Can digital transformation promote enterprise perfor-mance? From the perspective of public policy and innovation. Journal of Innovation & Knowledge, 7(3), 100198. doi: 10.1016/j.jik.2022.100198.
DOI: https://doi.org/10.1016/j.jik.2022.100198
View in Google Scholar
Pittman, J. A., & Fortin, S. (2004). Auditor choice and the cost of debt capital for newly public firms. Journal of Accounting & Economics, 37(1), 113?136. doi: 10.1016/j.jacceco.2003.06.005.
DOI: https://doi.org/10.1016/j.jacceco.2003.06.005
View in Google Scholar
Premkumar, G., Ramamurthy, K., & Saunders, C. S. (2005). Information pro-cessing view of organizations: an exploratory examination of fit in the context of interorganizational relationships. Journal of Management Information Systems, 22(1), 257?294. doi: 10.1080/07421222.2003.11045841.
DOI: https://doi.org/10.1080/07421222.2003.11045841
View in Google Scholar
Qi, Y. X., Roth, L., & Wald, J. K. (2010). Political rights and the cost of debt. Jour-nal of Financial Economics, 95(2), 202?226. doi: 10.1016/j.jfineco.2009 .10.004.
DOI: https://doi.org/10.1016/j.jfineco.2009.10.004
View in Google Scholar
Qian, J., & Strahan, P. E. (2007). How laws and institutions shape financial con-tracts: the case of bank loans. Journal of Finance, 62(6), 2803?2834. doi: 10.1111/j.1540-6261.2007.01293.x.
DOI: https://doi.org/10.1111/j.1540-6261.2007.01293.x
View in Google Scholar
Rachinger, M., Rauter, R., Müller, C., Vorraber, W., & Schirgi, E. (2018). Digitaliza-tion and its influence on business model innovation. Journal of Manufacturing Technology Management, 30(8), 1143?1160. doi: 10.1108/JMT M-01-2018-0020.
DOI: https://doi.org/10.1108/JMTM-01-2018-0020
View in Google Scholar
Spence, M. A. (2002). Signaling in retrospect and the informational structure of markets. American Economic Review, 92(3), 434?459. doi: 10.1257/000282802 60136200.
DOI: https://doi.org/10.1257/00028280260136200
View in Google Scholar
Stulz, R. M. (1988). Managerial control of voting rights: financing policies and market for corporate control. Journal of Financial Economics, 20(1-2), 25?54. doi: 10.1016/0304-405X(88)90039-6.
DOI: https://doi.org/10.1016/0304-405X(88)90039-6
View in Google Scholar
Tian, G., Li, B., & Cheng, Y. (2022). Does digital transformation matter for corpo-rate risk-taking? Finance Research Letters, 49, 1?9. doi: 10.1016/j.frl.2022.103 107.
DOI: https://doi.org/10.1016/j.frl.2022.103107
View in Google Scholar
Verhoef, P. C., Broekhuizen, T., Bart, Y., Bhattacharya, A., Dong, J. Q., Fabian, N., & Haenlein, M. (2021). Digital transformation: a multidisciplinary reflection and research agenda. Journal of Business Research, 122, 889?901. doi: 10.1016/j.jbusres.2019.09.022.
DOI: https://doi.org/10.1016/j.jbusres.2019.09.022
View in Google Scholar
Vial, G. (2019). Understanding digital transformation: a review and a research agenda. Journal of Strategic Information Systems, 28(2), 118?144. doi: 10.1016/ j.jsis.2019.01.003.
DOI: https://doi.org/10.1016/j.jsis.2019.01.003
View in Google Scholar
Warner, K. S. R., & Wager, M. (2019). Building dynamic capabilities for digital transformation: an ongoing process of strategic renewal. Long Range Planing, 52(3), 326?349. doi: 10.1016/j.lrp.2018.12.001.
DOI: https://doi.org/10.1016/j.lrp.2018.12.001
View in Google Scholar
Wen, H., Zhong, Q., & Lee, C. C. (2022). Digitalization, competition strategy and corporate innovation: evidence from Chinese manufacturing listed companies. International Review of Financial Analysis, 82, 102166. doi: 10.1016/j.irfa. 2022.102166.
DOI: https://doi.org/10.1016/j.irfa.2022.102166
View in Google Scholar
Xu, H. F., Xu, X. D., & Yu, J. L. (2019). The impact of mandatory CSR disclosure on the cost of debt financing: evidence from China. Emerging Markets Fi-nance and Trade, 57(8), 2191?2205. doi: 10.1080/1540496X.2019.1657401.
DOI: https://doi.org/10.1080/1540496X.2019.1657401
View in Google Scholar
Xu, X. D., Zeng, S. X., Zou, H. L., & Shi, J. J. (2016). The impact of corporate envi-ronmental violation on shareholders? wealth: a perspective taken from media coverage. Business Strategy and the Environment, 25(2), 73?91. doi: 10.1002/ bse.1858.
DOI: https://doi.org/10.1002/bse.1858
View in Google Scholar
Zeng, G. Y., & Lei, L. X. (2021). Digital transformation and corporate total factor productivity: empirical evidence based on listed enterprises. Discrete Dynamics in Nature and Society, 2021, 1?6. doi: 10.1155/2021/9155861.
DOI: https://doi.org/10.1155/2021/9155861
View in Google Scholar
