Board Informal Hierarchy and Digital Transformation: Evidence From Chinese Manufacturing Listed Companies

Abstract

Board informal hierarchy plays a crucial role in board governance and corporate strategic decision-making. The article empirically examines the impact of board informal hierarchy on corporate digital transformation based on relational contract theory, using a fixed-effects model with Shanghai and Shenzhen A-share listed manufacturing companies from 2012 to 2019 as research subjects. The findings of this study demonstrate a positive correlation between board informal hierarchy and digital transformation. Specifically, the presence of a chairman with the highest rank in the informal hierarchy strengthens this relationship, while the presence of a CEO with the highest rank weakens it. Mechanistic analysis shows that informal hierarchy accelerates digital transformation through three channels: improving board decision-making efficiency, mitigating management myopia, and facilitating information communication. This study extends existing research. On the one hand, this paper explores the drivers of digital transformation in manufacturing firms at the level of corporate governance and board characteristics. The findings provide empirical evidence to support the understanding of transformational change behaviors of manufacturing enterprises in the digital economy. On the other hand, it also opens up the “black box” of the internal operation of the board and provides valuable lessons for strengthening board governance. JEL Classification: D21; M12; Z13.