Digitalization has emerged as a transformative force in the corporate world, profoundly influencing firm behavior and performance. While its impact on operational efficiency and organizational outcomes is well-documented, limited research examines its role in corporate governance effectiveness. This study explores how digitalization enhances corporate governance by increasing transparency and efficiency in business processes, thereby enabling improved monitoring and checks by stakeholders. We hypothesize that digitalization has a stronger impact in firms with higher information asymmetry, such as those with complex or opaque operations. Using data from Chinese publicly listed companies, we find that digitalization positively improves corporate governance performance, with stronger effects observed for firms with higher information asymmetry, such as those characterized by greater business complexity or opacity. Leveraging an exogenous shock in China's IT infrastructure development, we also establish causal evidence supporting our findings.
