Can Digital Transformation Facilitate Firms’ M&A: Empirical Discovery Based on Machine Learning

Abstract

ABSTRACT Combining with Transaction Cost Economics theory, we attempt to analyze the impact of digital transformation on mergers and acquisitions (M&A) from a micro perspective. With the help of machine learning methods, we construct a measure of corporate digital transformation, based on which we use management discussion and analysis data from the annual reports of Chinese listed companies from 2010 to 2019 to find that corporate digital transformation can significantly promote M&A; heterogeneity analysis shows that digital transformation has a more significant effect on promoting M&A among private enterprises and companies with higher analyst coverage; and mechanism analysis shows that digital transformation influences M&A through reducing internal organizational costs; the findings have implications for understanding the role played by digital transformation in corporate boundary expansion and the impact among different firms.