Enterprise Digital Transformation and Overcapacity

In the new era, can enterprises take advantage of digital transformation to alleviate the current severe overcapacity problems? Based on A-share listed companies from 2004 to 2020, this paper finds that: First, digital transformation of enterprises will significantly reduce their overcapacity. This result is still very robust with alternative measures and by using an instrumental variable. Second, by further exploring the mechanism, we find that the enterprise digital transformation reduces overcapacity by alleviating the degree of information asymmetry and improving the level of corporate governance. Third, the effect is stronger among firms with lower market competition, higher capital intensity and high firm performance volatility. Our results have policy implications for digital development and help resolve overcapacity problem.