Corporate digital transformation, corporate green transformation, economic policy uncertainty, and corporate risk taking: evidence from Chinese listed companies

This study mainly examines four empirical issues. Firstly, this study examines the relationship between corporate digital transformation (CDT) and corporate risk taking (CRT). Secondly, this study examines the relationship between corporate green transformation (CGT) and CRT. Thirdly, this study examines the moderating effect of economic policy uncertainty (EPU) on the relationship between CDT and CRT. Fourthly, this study examines the moderating effect of EPU on the relationship between CGT and CRT. The CDT will also be examined from six perspectives which are corporate digital strategy, corporate digital technology, corporate digital organization, corporate digital environment, corporate digital application, and corporate digital achievement. This study uses panel data of Chinese listed companies from the financial period 2013 to 2022. Firstly, this study found that CDT significantly promotes CRT, specifically from three perspectives which are corporate digital strategy, corporate digital application, and corporate digital achievement. However, corporate digital technology, corporate digital organization, and corporate digital environment have no significant effect on CRT. Secondly, this study shows that CGT also significantly promote CRT. Thirdly, the results indicate that EPU positively and significantly moderates the relationship between CDT and CRT. Fourthly, the finding on the moderating effect of EPU on the relationship between CGT and CRT is somehow inconsistent. The results are robust to a battery of sensitivity analyses. The results are consistent in the presence of endogeneity and when alternative definition of variables and alternative sample period are being used. In addition, the significant positive effects of CDT and CGT in promoting CRT are prevalent in companies that are small in size, state-owned, companies that listed on SMEs Boared and ChiNext Board, low level of pollution. Overall, the findings support the agency theory, information asymmetry theory, and resource-based theory. According to agency theory, CDT, CGT and EPU can lessen agency costs between shareholders, managers, and creditors, enhance performance, and consequently enhance CRT. Also, consistent with information asymmetry theory suggest that CDT, CGT and EPU help to alleviate information asymmetry within companies and between companies and external stakeholders, hence enhance CRT. Whereas in support of the resource-based theory holds that CDT, CGT, and EPU alter the resource allocation mechanism of companies, enhance resource utilization efficiency, thereby increase CRT. The research findings of this study help regulators formulate targeted risk management guidance to guide CRT behavior based on the degree of CDT and CGT, and help companies to promote CDT and CGT in the background of EPU.