Tournament incentives and corporate digital transformation—evidence from China

We examined the effect of tournament incentives on digital transformation of corporations (hereinafter referred to as 'corporate digital transformation') by employing 34,373 Chinese firm-year observations for the period from 2008 to 2021. We found a significantly positive association between executive compensation gap and corporate digital transformation, and this result remained robust after correcting for endogeneity. We further shed light on how the executive compensation gap promotes corporate digital transformation through corporate risk-taking. Finally, we showed that executive power and economic policy uncertainty weakened the positive relationship between the executive compensation gap and corporate digital transformation.