Digital Transformation in Business Groups and the Efficiency of Internal Capital Markets

DOI: https://doi.org/10.62517/jbm.202409509

Author(s)

Fangwen Wang*, Hanzhou Wang

Affiliation(s)

School of Accounting, Yunnan University of Finance and Economics, Yunnan, Kunming, China *Corresponding Author.

Abstract

As the digital economy evolves, the rigidity of traditional financial management structures, poor communication, and weak risk resistance are becoming increasingly apparent. Consequently, digital transformation emerges as an essential strategy for corporate groups to keep pace with modern developments. This paper leverages transaction cost theory and information asymmetry theory to explore how digital transformation can effectively enhance the operations of internal capital markets. The analysis suggests that digital transformation at the group level facilitates information integration, boosts management efficiency, dismantles information silos to foster group cohesion, and strengthens risk management. These improvements support the effective allocation of internal capital, thereby amplifying the "multi-money effect" and "active money effect" within the group’s internal capital markets, leading to more efficient operations. This study not only enriches the existing literature but also offers significant insights for advancing digital transformation in business groups and enhancing the effectiveness of their internal capital markets.

Keywords

Business Groups, Digital Transformation, Internal Capital Markets, Information Integration, Management Efficiency

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