The Impact of Corporate Digital Innovation on Debt Financing Costs: The Mediating Role of Information Disclosure Quality

Abstract

This study employs data from A-share listed companies in China from 2012 to 2023 to empirically examine the impact of corporate digital innovation on debt financing costs, with a particular focus on the mediating role of information disclosure quality. Utilizing textual analysis methods, the findings reveal that the true effect of digital innovation on debt financing costs may be partially obscured by other factors in the main regression analysis. After accounting for control variables that absorb confounding effects, the net impact becomes more pronounced. Robustness checks confirm the validity of the core findings across different measurement approaches, suggesting that the cost-reducing effect of digital innovation on debt financing exhibits broad applicability. Mechanism analysis further demonstrates that information disclosure quality serves as a significant mediator in the relationship between digital innovation and financing costs. Heterogeneity analysis using interaction terms shows that improvements in digital innovation significantly reduce debt financing costs across firms of different sizes, board independence levels, and growth potentials. As existing research on the mechanisms through which digital innovation influences debt financing costs remains limited, this study contributes to the literature by enriching the understanding of the economic consequences of digital innovation.