How does digital transformation predict the investment cycle in family enterprises?

This paper explores the impact of digital transformation on the investment efficiency of family enterprises. Using a multiperiod difference-in-differences (DID) model, the study finds that, compared with nonfamily enterprises, family enterprises experience a significant decline in investment efficiency following digital transformation. Mechanism tests indicate that increased agency costs and heightened risk-taking in family firms' post-digital transformation drive this decline. The negative effect is pronounced in firms with higher pre-transformation information quality and those with lower financial constraints. This study contributes to the literature by examining corporate digital transformation through the lens of investment cycles in family firms, thereby deepening our understanding of the economic consequences of technological cycles. Additionally, the findings offer valuable insights for family enterprises, guiding them in making informed decisions about digital transformation, developing effective adaptation strategies, and maximizing the benefits of technological advancements.