Is faster really better? The impact of digital transformation speed on firm financial distress: Based on the cost-benefit perspective

Abstract

Based on the cost–benefit perspective, this study theoretically analyzes and empirically examines the influence of digital transformation speed on firm financial distress. We find that digital transformation speed has a U-shaped relationship with firm financial distress. In addition, after considering the moderating effect of CEO IT background, we find that not only does the effect of digital transformation speed on firm financial distress but, more importantly, their relationship also undergoes a shape-flip from the original U-shape to an inverted U-shape. Finally, we find that CEO power weakens the moderating effect of CEO IT background on the relationship between digital transformation speed and firm financial distress. Our research not only helps to advance theoretical and empirical research on digital transformation but also provides important empirical insights for understanding the economic consequences of accelerating digital transformation, which can be beneficial for digital transformation firms’ managers, investors, and other stakeholders.