Analysis Of the Effect of Vertical Executive Interlocks on Corporate Digital Transformation

As China's digital economy continues to expand, the digital transformation of enterprises has emerged as a new trend driving future economic development. Vertical executive interlocks, a critical corporate governance mechanism, exert significant influence on firms' digital transformation processes. Using a sample of Chinese A-share listed companies from 2007 to 2023, this study investigates the impact of vertical executive interlocks on corporate digital transformation.Empirical results demonstrate that vertical executive interlocks significantly inhibit firms' digital transformation efforts. This conclusion remains robust after conducting robustness checks, including the Heckman two-stage model and propensity score matching (PSM). Further analysis reveals that vertical executive interlocks suppress digital transformation through enhanced tunneling effects. Specifically, the inhibitory effect is more pronounced when firms with vertically interlocked executives exhibit lower institutional investor ownership or poor audit quality.This research contributes to the literature by deepening our understanding of the determinants of corporate digital transformation and shedding light on the role of vertical executive interlocks as a governance mechanism. The findings provide practical implications for optimizing corporate governance structures, accelerating digital transformation, and fostering the flourishing development of China's digital economy.