Unexpected consequence of enterprise digital transformation on financial investments

Digital transformation provides new opportunities for companies, but also unexpected consequences. We quantify the firms' level of digitalization using text analysis to examine whether digital transformation affects financial investment. The results conclude that digital transformation increases financial investment and our findings remain valid after robustness checks, indicating that digital transformation unexpectedly exacerbates the financialization problem of Chinese companies. We further discuss the motive and channels of corporate financialization under digital transformation. Our results show that digital transformation increases financial investment through financial surrogate intermediaries and higher return on financial assets. Therefore, managers should not ignore the potential negative effects during the process of digital transformation.