Digital transformation of enterprises and stock price crash risk

What is it about?

This study investigates the effect of enterprise digital transformation on stock price crash risk using a sample of Chinese listed companies during the period 2007-2020. We find that the digital transformation of enterprises can significantly reduce stock price crash risk, and shows a certain structural heterogeneity. The above conclusions still hold after a series of robustness tests. Further, we identify that the relationship is more pronounced in high-tech enterprises and economically developed regions.

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Why is it important?

First, according to the existing literature, this paper investigates the relationship between enterprise digital transformation and stock price crash risk for the first time, enriching the literature in the field of stock price crash risk research. Second, we expand the understanding of stock price crash risk from the perspective of the main body of the microstructure, and deepen the understanding of the internal relationship between the digital transformation of enterprises and crash risk. Finally, the research conclusions have certain enlightening significance for how to use digital transformation to reduce crash risk.

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