Journal of Accounting and Management Vision

Journal of Accounting and Management Vision

The impact of digital transformation on corporate inefficient investment with the moderating role of financial constraints and earnings management.

Document Type : Original Article

Authors
1 Assistant Professor, Accounting Department, Islamshahr Branch, Islamic Azad University, Islamshahr, Iran.
2 Professor of Accounting Department, Parandak Institute of Higher Education, Saveh, Iran.
3 Master of Accounting, Parandak Institute of Higher Education, Saveh, Iran.
Abstract
The aim of this study is to investigate the effect of digital transformation on inefficient investment in companies listed on the Tehran Stock Exchange, with an emphasis on the moderating role of financial constraints and earnings management. The statistical population of the study included all companies listed on the Tehran Stock Exchange between 2017 and 2023, and a sample of 168 companies (1176 company-year observations) was selected using a purposive screening method. The data were analyzed using ordinary least squares (OLS) regression models. The inefficient investment variable was measured through the new investment residuals model, digital transformation with the natural logarithm of the number of words related to digitalization in financial statements, financial constraints with the KZ index, and earnings management with the modified Jones (1991) model. The findings showed that digital transformation has a positive and significant effect on inefficient investment (p<0.01). Also, financial constraint and earnings management moderate the relationship between digital transformation and inefficient investment with negative and significant interaction coefficients (p<0.01), respectively, such that this effect is reduced in companies with high financial constraint or high level of earnings management. The results indicate that digital transformation can increase investment inefficiency, but financial constraint and earnings management act as control mechanisms. It is suggested that company managers reduce investment inefficiency by strategic planning of digital transformation and stock exchange policymakers by increasing information transparency.
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