Research on the Influence of Digital Transformation on Enterprise Internal Control Quality

Introduction

In recent years, the world economy has transformed into a mature digital economy led by data-driven innovation (Sultana et al., 2021). With the continuous emergence of “ABCD” technologies such as artificial intelligence, blockchain, cloud computing, and big data, digital technology is gradually becoming an important breakthrough point in the development and transformation of global enterprises (Nicoletti et al., 2020). According to the China Digital Economy Development Report (2022), the scale of China’s digital economy has reached 45.5 trillion yuan in 2021, accounting for 39.8% of its gross domestic product, which has become an important support for high-quality development of the national economy. In 2020, the sudden COVID-19 epidemic had a major impact on China and even on the global economy and society. In the special stage of fighting the epidemic, digital technology played an irreplaceable role in epidemic prevention and the resumption of work and production of the real economy (Chadee et al., 2021). Under such policy-driven and practice-oriented changes, digital transformation (DITI) has become an important driving force for high-quality development of microeconomic entities (Ding et al., 2021).

With the rapid development of digital technology, it is not difficult to find that, under the new situation of the continuous impact of the COVID-19, the sharp increase of global economic and trade uncertainty, the contraction of global industrial chains and supply chains, the increasing downward pressure on the economy, and the acceleration of economic structural transformation, the world is experiencing unprecedented changes (Wang, 2020), and the development of manufacturing enterprises is also facing unprecedented challenges. In 2021, the added value of China’s manufacturing industry was 31.38 trillion yuan, corresponding to an increase of 9.8% over the previous year. Against the backdrop of the impact on the global supply chain, Chinese manufacturing stood out and showed strong growth. However, with the rapid expansion of the scale, manufacturing enterprises’ internal control failures, including financial fraud and economic violations, occurred frequently, such as Ruixing coffee’s forged transaction volume of 2.2 billion yuan, Kangmei pharmaceutical’s 30 billion cash “disappeared,” Furen pharmaceutical’s 1.7 billion cash book unable to pay dividends, and Kangdexin’s 12.2 billion “flying away,” which not only reflect the major problems in the accounting information disclosure of manufacturing enterprises in China, but also raise concerns about the quality of internal control of listed manufacturing companies. Internal control quality (ICQ) is the key and foundation to enhance the risk resistance and control ability of manufacturing enterprises, and it is also the decisive factor affecting the high-quality development of manufacturing enterprises. Under the new situation, faced with the impact of a new round of scientific and technological revolution represented by artificial intelligence technology and the influence of the global COVID-19, how to improve the ICQ of manufacturing enterprises has become an important issue the industry and academia have to solve urgently.

DITI has given enterprises new development momentum. Can this further affect enterprises’ ICQ? If there is an impact, how does this impact affect the ICQ of the enterprise, and whether there are significant differences in different situations? These problems are not only related to the quality and efficiency of manufacturing enterprises’ DITI, but also crucial to accurately identify the enabling effect of digital technology. Unfortunately, to date, most scholars have mainly analyzed the economic consequences of DITI from the aspects of business performance and innovation ability (Eller et al., 2020; Nwankpa & Datta, 2017), and few researchers have focused on whether enterprise DITI would have an impact on the ICQ. The research on the operation law between enterprise DITI and ICQ is not sufficient. Thus, in this research, the authors empirically tested the impact mechanism of DITI on ICQ based on the data of China’s A-share manufacturing listed companies from 2008 to 2020, so as to provide new evidence for understanding the effect of enterprise DITI.

This study makes several theoretical contributions: