Corporate digital transformation and financialization: Evidence from Chinese listed firms

We examine the relationship between digital transformation and corporate financialization using Chinese-listed firms from 2007 to 2021. Results show that digital transformation facilitates corporate financialization, and this positive relationship is pronounced among firms with high agency costs and low institutional ownership. We find that the profit-chasing motive for financialization is the predominant driving force. To verify the motivation, we find that risk -taking behaviors and the yield spreads between financial and tangible assets increase along with the digital transformation. To avoid excessive financialization, corporate managers and regulatory agencies should strengthen their corporate governance under digital transformation.