The Impact of Digital Transformation on Excessive Financialization in the Real Economy

Abstract

The development of the real economy is the cornerstone of sustainable social development. However, affected by the macroeconomic downturn and the profit-seeking nature of capital, the profit margins of real enterprises have been squeezed, resulting in an increase in hollowing out and excessive financialization of the real economy. Emerging technologies have revitalized the real economy, making digital transformation a critical strategy for enterprise growth. Based on data from non-financial listed companies in China’s A-share market from 2010 to 2023, this study explores how digital transformation mitigates over-financialization. The results indicate that advanced digital transformation can significantly curb excessive financialization of companies. First, it reduces governance costs and enhances information transparency, curbing management’s self-serving behavior and thereby inhibiting financialization. Second, it optimizes decision-making and improves investment efficiency. Further analysis reveals that these effects are more pronounced in early-growth companies, firms with limited investment opportunities, and those with low external visibility. This research provides a new perspective on the sustainable development of the real economy and helps more companies realize the opportunities brought about by digital technology.