How does digital transformation affect enterprise diversification?

Digital economy has become an innovation for social and economic development. As important for the implementation of digitalization, will the digitalization of factors in the context of reconstruction production lead to ‘cross-border changes’ in enterprises? This paper studies the impact of digital transformation on enterprise diversification with samples of The Shanghai and Shenzhen Stock Exchange enterprises from 2007 to 2020. The results show that digital transformation promotes the diversified development of enterprises. The main mechanism is to improve the level of innovation, strengthen talent agglomeration and internal control quality. The expansion test shows that the diversified development brought by digital transformation can effectively improve investment efficiency, and also alleviate the negative relationship between diversification and enterprise value. Meanwhile, digital transformation is more inclined to vertical business expansion, and the enterprise value is effectively improved through related diversified development. The conclusions make up for the lack of research on enterprise diversification and also provide experience for enterprises to improve the corporate governance mechanism and accelerate the promotion of digital transformation.