Corporate digital transformation and cost of equity capital

This paper examines the impact of corporate digital transformation on the cost of equity capital. The results indicate that corporate digital transformation significantly reduces the cost of equity capital. Mechanism tests find that digital transformation can reduce the cost of equity capital by improving the quality of disclosure, reducing operational risk, and enhancing economic performance. Cross-sectional analysis finds that the relationship between digital transformation and the cost of equity capital is stronger for non-state-owned firms, non-high-tech firms, and firms with a better environment for building external digital infrastructure. Our findings reveal the impact of the digital technology revolution on market investors, providing important empirical evidence that digital transformation can help improve the efficiency of capital market resource allocation.