Digital Transformation and Stock Price Informativeness

This study examines the impact of digital transformation on the stock price informativeness and the underlying mechanisms in Chinese equity market. Based on the textual analysis method, we find that the adoption of digital technologies can significantly lower the stock price synchronicity. Moreover, the mechanism analysis suggests that increasing accessibility and earnings quality as well as enhancing innovation are the economic channels through which digital transformation improve the informational efficiency of prices. Further analysis shows that the impact of digital transformation will be more pronounced among competitive industries and innovation-intensive firms. We also confirm that the market enables to identify the firms’ efforts devoted in the digital transformation. Overall, our findings provide a new insight to economic consequences of digital transformation