Digital Transformation and Allocation of Decision-Making Power: Empirical Evidence from Enterprise Groups

Abstract

Abstract: Little attention in the existing literature is paid to the impact of digital transformation on the allocation of decision-making power within enterprise groups. By making use of the data of A-share listed companies from 2007-2020, this paper analyzes the relationship between digital transformation and the allocation of decision-making power in enterprise groups. The results show that digital transformation has significantly reduced the the concentration of decision-making power allocation in enterprise groups, and that the down movement of decision-making power can contribute to the better integration between the expertise and decision-making for the subsidiaries, which ultimately increases their innovation output. This conclusion remains robust after controlling the possible endogenous issues. The mechanism analysis shows that digital transformation facilitates decentralized management in enterprise groups mainly by reducing the agency costs of the subsidiaries. It is found through distinguishing the types of digital transformation that both the underlying technology and practical applications of digital transformation contribute to reducing the concentration of corporate decision-making power allocation. The results of the test based on the enterprise characteristics and the compatibility of digital transformation between parent and subsidiary companies show that digital transformation has a more significant impact on the decentralization of decision-making power allocation in non-state-owned and high-tech enterprise groups. The high digitalization of parent companies and subsidiaries is more conducive to the formation of a decentralized governance model in enterprise groups. Therefore, the government authorities should further accelerate the pace of digital transformation to optimize the allocation of decision-making power within enterprise groups, thereby promote the construction of a strong and innovative country.

Key words: digital transformation, allocation of decision-making power, agency costs, information costs

CLC Number:

F272.3

XU Wen-shuai, PENG Jian-fei, WU Yun-lang. Digital Transformation and Allocation of Decision-Making Power: Empirical Evidence from Enterprise Groups[J]. Contemporary Finance & Economics, 2024, 0(5): 101-113.

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