Digital transformation is not a painless change:Evidence from corporate risk

Digital transformation (DT) is a must for enterprises, however, enterprises first face more challenges and shocks in the process of DT. Based on the data of A-share listed companies from 2012 to 2020, we find that DT increases corporate risk (CR). Multiple tests provide convincing support for the robustness of our baseline results. We prove that the risk policy of expanding digital innovation activities is an important channel through which DT leads to an increase in CR. In addition, we test for cross-sectional variation in baseline effects. The promotion effect of DT on corporate total risk is mainly driven by high-tech enterprises and fierce industry competition environment. Overall, this paper highlights the unintended outcomes of DT on corporate operations through specific risk policy mechanisms, offering crucial practical insights on risk management for firms in DT.