Why and how executive equity incentive influences digital transformation: the role of internal and external governance

Executives play a decisive role in the strategic adjustment of digital transformation, yet few studies explore the impact of executive equity on firms' digital transformation. Taking 2009-2019 listed manufacturing companies in China as the research object, we integrate the interest convergence effect hypothesis and risk aversion hypothesis in upper echelons theory to explore why and how executive equity accelerates firms' digital transformation. The research shows that equity incentive enables executives to converge with corporate interests in digital transformation. Specifically, in China's unique internal governance and institutional environment, enterprises with low ownership concentration, minimal distortion of market factors and fewer political connections, a more significant positive impact of executive equity incentives on digital transformation. However, the supervisory role of independent directors does not work, as their selection and appointment are determined by the controlling shareholder. This article is the first to analyze the factors driving firms' digital transformation from the perspective of executive-enterprise interest convergence.