1. Introduction
The digital economy has emerged as a fresh engine for economic growth in the context of China’s economic change. In order to support a company’s regular administration and functioning, the finance department is crucial. However, accountants of many companies have not dismissed the traditional financial management concept but still focus on the main functions of accountants: accounting and supervision. Accountancy dominated by this idea cannot escape from large workloads and a complicated process, so it has more and more difficulty adapting to modern businesses. Therefore, to the growth trend of company digital transformation, the finance department’s old operating mode has been challenging to adjust and will even have a negative impact on it [
1,
2,
3]. Facing the above problems, companies need to recognize the significance of the financial digital transformation, and improve business information transparency [
4], reduce costs, and increase efficiency through financial digital construction [
5,
6,
7]. Financial digitization is the process of collecting, handling, and applying business data by applying digital technologies. In this process, companies can receive more comprehensive information and improve their management levels and value-creation capabilities [
8]. Financial digitalization can change the internal structure, operation mode, and thinking concept of companies with digital technologies, thus establishing a data-centerd management system and realizing the transformation of financial management activities from measuring value to creating value [
8,
9]. Three strategies were suggested by the State-owned Assets Supervision and Administration Commission’s Notice on Accelerating the Digital Transformation of State-owned Companies, which was published in September 2020: transformations based on IT, business, and finance. Among them, financial digital transformation is the starting point of the digital transformation of central companies. Thus, it is imperative to carry out the financial digital transformation of a company that wants to complete digital transformation successfully. According to the
Outline of the Fourteenth Five-Year Plan for Accounting Reform and Development issued by the Ministry of Finance, accountancy should be consistently based on digital technologies, and proactively promoting the digital transformation of accounting management and the close integration of accounting with macroeconomic management at the national level as well as corporate operation and management functions is important. Subsequently,
the Accounting Informatization Development Plan (2021–2025) also pointed out that accountants need to aggressively embrace the digital era’s coming and fiercely support the growth of accounting information technology. At present, the overall objectives of China’s accounting informatization include accelerating the transformation and upgrading accounting digitization, giving accounting data its due consideration, and continually enhancing the accounting information system. Accordingly, financial digital transformation is increasingly valued by the government and companies in the tide of digital transformation.
In China, A-share companies listed on the Shanghai and Shenzhen Stock Exchanges are the backbone for China’s economic development and the active market players in the economy and take a leading position in various industries. With an absolute advantage in economic scale, these companies are superior to other types of companies in terms of financing and profitability. However, the companies listed on A-share have inefficient information transmission and communication and difficulties in management and coordination due to their large scale, their large number of staff, complex ownership, and departments [
10]. In addition, as the COVID-19 fully broke out at the end of 2019, numerous employees could not go to work normally because of large-scale quarantines, which put huge pressure on the normal operation and development of companies and influenced the profitability of most A-share listed companies [
11,
12]. The performance report of listed companies in the first quarter of 2020 indicates that nearly two-thirds of the companies presented downward performance. In particular, in the first quarter of 2020, the net profit of the firms listed on the Shenzhen Stock Exchange fell by 22.518 to 41.507 billion yuan, a year-on-year decrease of 30.84% to 56.85% (Data source:
https://www.163.com/dy/article/FAGI88V40512DU6N.html (accessed on 17 January 2023)). In terms of the difficulties in company development under the pandemic, the
White Paper on the Global Digital Economy—New Hope of Recovery under the Impact of the Pandemic issued by the Chinese Academy of Communications pointed out that Chinese companies need to accelerate digital transformation based on the action of “carrying out inclusive cloud service support policies, promoting the integrated application of big data and increasing support for business intelligent transformation”. According to statistics from Zhongxingxin Cloud Service, there were above 1000 finance-sharing service centers in China by the end of 2020 (Data source:
http://ztcfol.com.cn/h-nd-384.html?checkWxLogin=true (accessed on 17 January 2023)). An increasing number of A-share listed companies have gradually accepted and carried out financial digital transformation. In future developments, financial digital transformation will become a competitive advantage for companies listed on the A-share. Therefore, a question is how the A-share listed companies can reduce costs and heighten efficiency through financial digital transformation.
This study examines the process by which financial digital transformation affects the financial performance of A-share listed companies in order to respond to this issue. It does so using a panel data regression model. This study explores the relationship between financial digital transformation and corporate financial performance as well as the function of financial digital transformation in lowering operational costs and information asymmetry.
This study makes several important contributions. Firstly, while there is a plethora of literature on digital transformation [
13,
14,
15,
16], there is a dearth of quantitative analyses on financial digital transformation, with only a few case studies available [
17,
18]. This study addresses this gap by constructing a dictionary of financial digital transformation feature words, based on the work of Chen and Xu, Tian et al., and Wu et al. [
5,
19,
20]. The frequency of these feature terms in the statements of A-share listed firms is then measured using text mining techniques, with the resulting text analysis results serving as the proxy variables of financial digital transformation. Secondly, while case studies have shown that financial digital transformation improves performance, the underlying mechanism is not yet clear [
17]. This study seeks to address this gap by focusing on how financial digital transformation influences financial performance and by clearly proposing the intermediary effect of the information symmetry level and operating cost. Thirdly, this study provides further analysis of the relationship between the two intermediary variables and verifies that financial digitalization reduces information asymmetry, leading to a reduction in operating costs and an improvement in corporate financial performance. Thus, the effect of financial digital transformation on financial performance is further elucidated in this section of the study.
5. Conclusions
China’s digital strategy places a heavy emphasis on the digitization of financial services, a cornerstone of the country’s emerging digital economy, and has played a vital role in boosting China’s economy. In this study, combined with the text mining method, the panel data regression model, and the intermediary effect test, research into the connection between financial digital transformation and corporate financial performance was conducted using data from China’s A-share listed companies. The data also allowed for the investigation of the mediating effect of the information symmetry level and operating cost. The validity of the findings was verified by means of an endogenous test and a robustness test.
5.1. Theoretical Implications
For A-share listed companies, financial digital transformation can effectively improve their financial performance permanently. First, based on a finance shared service model, financial digital transformation aims to alleviate the limitations of traditional financial management models on the development of modern companies, optimize the financial management process, change the internal employment structure, and reduce the total scale and share of labour costs of digital technologies, thus improving the operating profits of the companies. Second, during financial digital transformation, companies can effectively obtain internal and external information via the sharing platform, helping them strengthen their internal control power, realize dynamic management, absorb a large number of professional and external institutional investors, and effectively empower companies to innovate, thus improving their core business performance. Third, in the big data environment, with the help of carrying out financial innovation and transformation and establishing a big data financial system, companies can promote the transformation of financial management to a decision-support type, improve decision-making efficiency, and reduce default risk.
According to the transmission intermediary way, the information symmetry level has partial intermediary effects in the relationship between financial digital transformation and corporate financial performance; that is, financial digital transformation improves corporate financial performance by improving the information symmetry level and reducing operating costs. For the information symmetry level, on the one hand, companies should integrate digital technologies into financial information management, build a financial sharing center, integrate the business processes carried by many information systems, and constantly strengthen rules and standards. This helps them effectively collect, screen, and apply internal information; improve the communication speed between the finance department and various businesses; and enhance companies’ management efficiency. On the other hand, companies communicate with stakeholders via the financial sharing center more frequently so that external market information can be summarised into the strategic layout and daily management of companies in a high-density and efficient manner. This helps them make investment and financing decisions, formulate strategies, and participate in market competition more accurately. In addition, based on the signal transmission theory, the financial digital transformation of companies will also signal that they have a promising development prospect to attract investment so that they can obtain more external financing to expand production and gain more profits.
Regarding operating costs, the external environment can be effectively improved. Effectively overcoming regional cultural differences, language barriers, and national differences; reducing the cost of communication and cooperation between companies; facilitating communication; lowering cross-border costs; quickly collecting large user data from multiple dimensions to achieve accurate positioning and marketing to users; and reducing marketing costs are all made possible through a company’s digital transformation. Moreover, digital transformation is conducive to reducing the costs of companies moving in ground space and realizing the combination of low cost and high income. Internally, by using digital technologies, companies can optimize existing business processes; achieve more effective cross-process coordination to reduce relevant costs; generate and utilize internal data information in a more complete and accurate way; and continuously integrate personnel, businesses, and activities scattering in the past, thus reducing various internal management costs and improving corporate performance.
This study considers that the discrepancies in the geographical conditions of companies may have different effects on the improvement of corporate financial performance, to empirically examine the impact of financial digital transformation on company financial performance. The sample firms are split between the eastern and central and western regions. Compared with the companies in the eastern provinces, those in the central and western provinces can improve their financial performance better through financial digital transformation. The main reason is that marketization has reached a high level in the eastern coastal areas, so the growth of financial performance brought by financial digital transformation has a marginal diminishing effect. However, in order to boost their financial performance, enterprises in the central and western areas need to undergo a more extensive financial digital transformation.
5.2. Economic Implications
First, against the backdrop of “industry digitalization” in China, financial digital transformation possesses immense potential for future value creation among enterprises. Therefore, companies ought to endeavour to seize policy opportunities, establish reasonable transformation strategies based on their own resource conditions, and systematically promote the process of financial digital transformation to stimulate the enhancement of financial performance.
Second, companies should place a high value on the construction of data processing and analysis capabilities. In the face of the explosive growth of data, businesses require not only the ability to collect real-time data rapidly but also the ability to process and analyze such data quickly and accurately, transforming it into useful information that supports decision-making. By doing so, they can reduce the cost of obtaining effective information, improve the information transparency of the enterprise, and ultimately enhance its competitiveness.
Third, companies should place a great deal of importance on the synergy between digital technology and the original production process. In the course of financial digital transformation, the introduction of digital technology can alter the relationship between the original production processes of companies, potentially resulting in imbalanced resource allocation and wastage. Therefore, it is crucial for businesses to pay close attention to the collaboration between financial digital technology and the original production process, accelerating the integration of digital technology with the original business process, work mode, and organization mode. By doing so, they can achieve overall resource optimization across business fields and links, reducing the operating costs of the enterprise.
Fourth, companies should prioritize the digitalization of business models and production processes. Financial digital transformation can enhance the financial performance of companies by optimizing the operation mode or production process. Businesses should take into account their own unique characteristics and choose an appropriate transformation path, whether it involves the digitalization of their business model or production process, or a combination of the two, while leveraging information technology and digital innovation to amplify their impact.
5.3. Policy Recommendations
First, at present, China’s listed companies lack a clear understanding of the financial digitization construction standard. It is recommended that the financial department should take the lead in involving companies and various financial and accounting experts and develop an institutional system for data standards, data collection, data transaction, data sharing, and data security, in the construction of financial digitization. The financial department should guide companies in implementing financial digital transformation reasonably and effectively, in accordance with the system standards.
Second, financial digital transformation necessitates significant capital investment. Apart from funds generated through the company’s own finances and external financing, government departments could leverage the catalytic role of government funds, providing tax incentives, special funds, or supporting funds. Meanwhile, government departments should establish an evaluation and tracking accountability mechanism for the impact of government funds, in order to maximize the efficiency of government capital investment and usage.
Third, there is a widespread scarcity of management personnel and professionals for financial digitization in Chinese companies. As the financial digital transformation of businesses continues to develop, the corresponding demand for financial professionals with digital capabilities has risen sharply. In the future, the financial department will require more comprehensive talents who possess knowledge of both finance and technology. Therefore, the Chinese government could focus on the cultivation of financial digital professionals, building up a reserve of talented individuals in this field.
Fourth, in the context of the rapid development of the digital economy and common prosperity, it is very important to accelerate the development of the central and western regions. Most of the eastern regions are developed cities close to the coast. The capital market is mature, the talent and technology are intensive, and the financial resources are abundant. On the contrary, the financial digital transformation in the central and western regions is still at a low level, due to the shortage of funds, talents, and technology. Therefore, the government should strengthen the infrastructure construction of financial digital transformation in the central and western regions, actively promote the cooperation between the government and enterprises in the field of digitalization, encourage enterprises to develop digital technology, use financial digital transformation to improve the current situation of low production efficiency, and alleviate the imbalance of regional development to a certain extent.
5.4. Limitations and Future Directions
This study seeks to address and bridge the knowledge gap concerning the relationship between financial digital transformation and corporate financial performance, using theoretical analysis and empirical analysis. Nonetheless, there are some limitations: First, with respect to the sample data, this study only employs data from China’s A-share listed companies from 2012 to 2021 for empirical testing, but the effect of financial digital transformation on enterprises needs to be observed over a certain period. Therefore, this study may have the issue of a short analysis period, resulting in research bias. Second, regarding the mechanism, this study only considers the two intermediary effects of information symmetry level and operating cost rate. However, the effect mechanism of financial digital transformation on enterprise financial performance is complex, and there are numerous unexplored mechanisms. There are two directions for further research. First, we will gather data over a longer time span to identify the diverse and dynamic correlation between financial digital transformation and corporate financial performance. Second, we will explore additional intermediary paths through which financial digital transformation impacts corporate financial performance.