Digital Transformation and Firm Performance: Evidence from U.S. Public Companies (2016–2025)

Abstract

In this paper, how digital transformation (DT) affects firms’ efficiency and profitability for listed firms in the U.S. over the time period of 2016 to 2025 is studied by using data collected and analyzed from SEC 10-K filings and published annual reports. The observations from datasets indicate that the value of DT intensity is calculated by a latent-topic analysis method utilizing texts concerning strategy, risk, and sustainability. A two-way fixed effect model is established to estimate the relationships between DT and those outcomes, such as asset turnover, operating cycle, gross margin, as well as ROA from a firm’s operational performances. Also, estimation findings indicate that more intensive usage of DT may help firms achieve higher asset turnover with shortened operating cycles, primarily caused by better forecasted demand, more facilitated reconciled tasks, and reduced cash held on receivables. Besides, findings are reinforced through controlling for companies’ features, where more intense competition in the industry and more volatile industries benefit from the utilization of DT. Finally, results are in favor of that DT serves as a cap concept associated with a firm’s technological investment towards good practices to meet demands efficiently in the short term and bring profits in the long run.