HETEROGENEOUS EFFECTS OF DIGITAL TRANSFORMATION ON CORPORATE CAPITAL ALLOCATION EFFICIENCY: A MULTI-MODEL ANALYSIS OF INSTITUTIONAL CONTINGENCIES IN JAPAN, INDIA, AND THE UK

Abstract

The proliferation of digital technologies has profoundly reshaped corporate financial decision-making, influ- encing capital allocation efficiency through improved transparency, governance automation, and financial innovation.   However,  the  extent to which digital transformation enhances capital allocation efficiency remains contingent on institutional contexts,  a  dimension  that has been largely underexplored.   This study investigates the heterogeneous effects of digital transformation on corporate capital allocation effi- ciency across Japan, India, and the UK, considering the interplay between firm-level absorptive capacity and macro-institutional enablers such as policy support and financial market sophistication. Leveraging a multi-method empirical framework—including dynamic panel system GMM estimation, quantile regression, and causal mediation analysis—this study uncovers significant cross-national variations in the efficiency gains from digital transformation. The findings reveal that digital adoption yields stronger improvements in capital allocation efficiency in countries with high digital policy support and well-developed financial markets.  In contrast, institutional voids and financial underdevelopment moderate the positive effects of digitalization, particularly in emerging economies. By integrating insights from digital institutionalism and resource orchestration theory, this research offers novel theoretical and empirical contributions to the dis- course on corporate finance in the digital era.  The results provide actionable implications for policymakers and business leaders seeking to optimize digital strategies for financial efficiency.