Local Government Debt and Corporate Digital Transformation: Evidence from China

This paper explores the effects and influence mechanism of local government debt on corporate digital transformation in Chinese listed companies, an area that has not been explored in the existing literature. We find that the expansion of local government debt has a significantly negative impact on corporate digital transformation. Such negative impact is greater in non-state-owned enterprises and companies with low concentration of ownership, as well as those in provinces with low fiscal self-sufficiency rates and low bank competition. Mechanism analysis shows that local government debt inhibits corporate digital transformation by intensifying corporate financing constraints and distorting corporate investment preferences.