Can digital transformation in manufacturing enterprises mitigate financial distress?

Purpose – The purpose of this paper is to help manufacturing enterprises seize the opportunities presented by the digital economy, enhance production efficiency and value creation capacity, and promote sustainable and high-quality development of China's manufacturing industry. Design/methodology/approach – This study employs a sample of Chinese A-share listed manufacturing companies from 2016 to 2020, using text analysis to construct measurement indicators for digital transformation and examining the impact of digital transformation on financial distress. Findings – The findings indicate that digital transformation in manufacturing enterprises helps alleviate financial distress. Heterogeneity analysis suggests that state-owned enterprises, large-scale enterprises, and those located in economically developed regions experience more significant alleviation of financial distress through digital transformation. Moreover, the moderating effects reveal that corporate governance level and financing constraints, representing the comprehensive capabilities of internal operational costs, management efficiency, and structure, and the comprehensive strength of external financing resources, respectively, can help enterprises maximise the alleviating effect of digital transformation on financial distress. Originality/value – Based on Chinese manufacturing enterprise samples, this paper empirically tests manufacturing enterprises are essential components of the national economy. Promoting digital transformation in manufacturing enterprises is the best choice for integrating the real economy with the digital economy.