Administrative Reforms and Enterprise Digital Transformation in China: Mechanisms and Impacts

This study examines the relationship between the “Revoke County to Urban District” (CTD) policy and the digital transformation (DT) of local enterprises in China, using panel data from A‐share listed companies from 2003 to 2020. By leveraging the CTD policy as a quasi‐natural experiment, a time‐varying difference‐in‐differences (DID) model is employed, supplemented by robustness checks using propensity score matching (PSM‐DID) and a generalized random forest (GRF) model. The findings reveal that the CTD policy significantly enhances enterprise DT, with the effect being more pronounced in non–state‐owned enterprises, non–high‐tech industries, county‐level cities, and regions with high levels of urbanization and digital financial inclusion. Furthermore, a GRF‐based conditional average treatment effect (CATE) analysis explores the interplay of firm characteristics—fixed asset proportion, gearing ratio, and return on assets—on the policy impact. The study identifies three core mechanisms driving DT: optimized resource allocation, improved internal controls, and enhanced human capital. These insights not only offer a theoretical framework for understanding the localized implementation of administrative reforms in China but also provide practical recommendations for designing policies to foster digital transformation.