TY - JOUR
T1 - Firms’ digital transformation and management earnings forecasts
T2 - Evidence from China
AU - Han, Fei
AU - Zhang, Xuehui
AU - Chan, Kam C.
AU - Li, Ya
N1 - Publisher Copyright:
© 2023 Borsa Ä°stanbul Anonim Åžirketi
PY - 2023/11
Y1 - 2023/11
N2 - This paper examines the impact of firms' digital transformation on management earnings forecasts with a sample of Chinese firms. Using a deep learning model and textual analysis, we create a proxy for digital transformation based on the frequency of keywords related to digitization in firms' annual reports. Our empirical results reveal that firms that engage in more digital transformation are more likely to issue management earnings forecasts voluntarily, more often, and with greater precision. The findings are robust to alternative metrics of management earnings forecasts and digital transformation, after accounting for endogeneity, and after considering firms' future forecasts. Additional analyses on the transmission mechanisms suggest that digital transformation improves firms’ information environment, enhances internal controls, and alleviates agency problems.
AB - This paper examines the impact of firms' digital transformation on management earnings forecasts with a sample of Chinese firms. Using a deep learning model and textual analysis, we create a proxy for digital transformation based on the frequency of keywords related to digitization in firms' annual reports. Our empirical results reveal that firms that engage in more digital transformation are more likely to issue management earnings forecasts voluntarily, more often, and with greater precision. The findings are robust to alternative metrics of management earnings forecasts and digital transformation, after accounting for endogeneity, and after considering firms' future forecasts. Additional analyses on the transmission mechanisms suggest that digital transformation improves firms’ information environment, enhances internal controls, and alleviates agency problems.
KW - Digital transformation
KW - Information environment
KW - Management earnings forecasts
UR - http://www.scopus.com/inward/record.url?scp=85172925901&partnerID=8YFLogxK
U2 - 10.1016/j.bir.2023.09.003
DO - 10.1016/j.bir.2023.09.003
M3 - Article
AN - SCOPUS:85172925901
SN - 2214-8450
VL - 23
SP - 1356
EP - 1366
JO - Borsa Istanbul Review
JF - Borsa Istanbul Review
IS - 6
ER -