Abstract
I examine the effects of digitalization and informatization on firm performance (ROE). I employed a multistage DID model, using smart city development as a natural experiment. Using a sample of Shanghai and Shenzhen listed companies, I discover that firms affected by smart city policy are more likely to have better performance. This finding is robust to a series of robustness checks. Cross-section analysis indicates that nonstate-owned firms, firms with lower power levels concentration and western firms are more likely to benefit from smart city construction. These findings can help managers and policymakers to better understand the mechanisms underlying the relationship between smart city development and firm performance and to develop tailored strategies to leverage the benefits of smart city development.
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