Digital Transformation of Firms and the Quality of Forward-Looking Disclosures: Through the Lens of Dynamic Capabilities

Grounded in the dynamic capabilities theory, this paper investigates the economic consequences of corporate digital transformation on annual report linguistic tone and the quality of forward-looking information disclosure. Leveraging a sample of Chinese A-share listed firms from 2010 to 2023, we adopt textual analysis, multi-dimensional textual indicators, staggered DID, PSM and a series of identification strategies to alleviate potential endogeneity concerns and conduct comprehensive robustness tests. We find robust evidence that digital transformation significantly improves the quality of forward-looking disclosures by optimizing hierarchical forward-looking disclosure performance, including authentic managerial optimistic expectations and standardized tone management behavior. These findings withstand endogeneity tests and alternative robustness checks. Furthermore, our cross-sectional analyses indicate that the positive impact is more pronounced for firms receiving substantial government subsidies or pursuing a cost leadership strategy, but is attenuated by high levels of R&D investment. Our research clarifies how digital transformation reshapes multi-layered forward-looking disclosure practices under the dynamic capabilities framework.