Does cybersecurity regulation promote digital transformation? Evidence from the Cyber Security Law in China

This study investigates the impact of cybersecurity regulation on corporate digital transformation, using China's Cyber Security Law implementation as a quasi-natural experiment. Based on data from 3,024 Chinese firms from 2008 to 2022, we find that cybersecurity regulation significantly promotes digital transformation. Heterogeneity analysis reveals that the effect is more pronounced for state-owned enterprises (SOEs) and firms with positive performance feedback. SOEs are more responsive to regulatory requirements owing to their policy-driven nature, while firms with positive performance feedback are better positioned to allocate resources for digital transformation. This study contributes to the literature on cybersecurity and digital transformation and provides notable insights for policymakers to optimize cybersecurity regulation development.