Against the backdrop of the rapid diffusion of digital technologies, digital transformation has become an important means for firms to enhance governance capacity and strengthen internal control systems. Using a sample of non-financial A-share listed companies in China from 2013 to 2022, this study employs a two-way fixed effects model to examine the impact of digital transformation on corporate internal control effectiveness, and further explores moderating and heterogeneous effects. Digital transformation is measured based on firms’ substantive investment in digital-related intangible assets, while internal control effectiveness is captured using the DIB internal control index. The empirical results indicate that digital transformation significantly improves internal control effectiveness after controlling for firm and year fixed effects. This positive effect is more pronounced in non-state-owned enterprises, firms located in eastern regions, and large firms, reflecting differences in resource endowments, governance foundations, and digital infrastructure. In addition, the moderating analysis shows that CEO duality strengthens the positive relationship between digital transformation and internal control effectiveness, suggesting that centralized leadership may facilitate the integration of digital technologies into internal control systems. A series of robustness checks, including the use of lagged digital transformation and the exclusion of the COVID-19 period, confirms the stability of the main findings. Overall, this study provides empirical evidence on the governance implications of digital transformation and offers insights for firms seeking to improve internal control effectiveness in the digital era.
Yang et al. (Thu,) studied this question.