Digital economy and business investment efficiency: Inhibiting or facilitating?

The digital economy’s integration with the real-world economy has revealed its remarkable ability to transform and promote traditional industries and form new economic development momentum. This paper studies the impact of digital economy development on corporate investment efficiency based on data...

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Bibliographic Details
Published in:Research in international business and finance 2022-12, Vol.63, p.101797, Article 101797
Main Authors: HUO, Peng, WANG, Luxin
Format: Article
Language:English
Subjects:
Digital economy
Financing constraints
Information asymmetry
Investment efficiency
Overinvestment
Underinvestment
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Summary:The digital economy’s integration with the real-world economy has revealed its remarkable ability to transform and promote traditional industries and form new economic development momentum. This paper studies the impact of digital economy development on corporate investment efficiency based on data from China’s listed companies from 2007 to 2019. There are three key findings. (1) Digital economy development can effectively improve corporate investment efficiency, mainly by inhibiting their overinvestment. (2) The digital economy’s impact mechanism for improving corporate investment efficiency lies in its ability to improve investment performance by reducing transaction costs and optimizing resource allocation, which, in turn, inhibits overinvestment. (3) The promotional effect of digital economy development on investment efficiency shows significant variability across different types of firms. These findings have particular reference value for promoting the digital development of China’s real industries and improving their investment efficiency. [Display omitted] •This paper studies the impact of digital economy development on firm investment efficiency.•Digital economy development effectively improves firm investment efficiency, mainly by inhibiting overinvestment.•The digital economy improves the efficiency of firm investment by reducing transaction costs.•The digital economy improves firm investment performance by optimizing resource allocation and discouraging overinvestment.•The promotional effect of digital economy on investment efficiency shows variability across different types of firms.
ISSN:0275-5319
1878-3384
DOI:10.1016/j.ribaf.2022.101797