Empowering Total Factor Productivity Through Financial Digital Transformation
Financial digitalization (FinDig) is reconceptualized as an enhancement of organizational knowledge management capabilities, specifically the systematic codification, sharing, and application of financial knowledge. By reducing internal knowledge transfer barriers (management friction) and external decision noise (information asymmetry), FinDig can improve total factor productivity (TFP). Using panel data of Chinese listed firms from 2013 to 2023, this study constructs a FinDig index and estimate TFP via the Levinsohn–Petrin method. Results reveal an inverted U-shaped relationship between FinDig and TFP, with 96.5% of firms remaining on the left side of the turning point still enjoying positive returns. Mechanism tests confirm that reducing investment-inefficiency, particularly curbing over-investment, is the core channel through which FinDig affects TFP. This study offers a knowledge management-based micro-explanation for the Solow paradox in digital transformation.