The digital transformation, corporate uncertainty, and CEO risk preference

Why this matters for today’s companies

As businesses rush to adopt artificial intelligence, big data, and cloud computing, we usually celebrate the technology itself—faster decisions, smarter factories, new apps. This study asks a quieter but crucial question: how does going digital change the mindset of the person at the top? Focusing on thousands of Chinese listed firms, the authors examine how digital transformation reshapes CEOs’ willingness to take risks and what that means for innovation, uncertainty, and long‑term growth.

Big data, new tools, new behavior

The researchers start from a simple idea: digital change is not just about machines and software; it is also about people. When companies adopt tools such as cloud platforms, sensors, and analytics, the CEO’s daily environment changes. Decisions rely less on gut feeling and more on dashboards and forecasts. To capture how far along each firm is on this journey, the authors use text‑mining on annual reports, counting how often digital‑related terms appear. They then pair this with a behavioral measure of risk preference, based on how much a firm invests in financial assets and properties whose values fluctuate strongly over time. This combination allows them to link the depth of digital transformation to the CEO’s actual appetite for risky projects.

Less fog, more caution

Across more than 31,000 firm‑year observations from 2015 to 2023, a clear pattern emerges: deeper digital transformation is associated with lower CEO risk taking. Put simply, as companies become more digital, their leaders grow more cautious. The study goes further and investigates why. Using language from the “Management Discussion & Analysis” sections of reports, the authors build an index of how uncertain executives perceive their environment to be. They also construct sophisticated market‑based measures of information gaps between firms and investors. In both cases, digital transformation reduces uncertainty and information asymmetry. With more timely and transparent data, the unknowns shrink. Faced with clearer odds, CEOs shift from bold bets toward more measured, calculable risks.

Same technology, different leaders

Not all CEOs react the same way to digitalization. Older leaders, highly paid executives, those with shorter tenures, and those without a research‑and‑development background become especially more risk‑averse as their firms digitalize. Many of them appear to use digital tools in part to hide or smooth over risky projects, while shareholders struggle with the sheer volume and complexity of new information. By contrast, younger or technologically trained CEOs are more comfortable with digital tools and treat them as opportunities rather than threats. At the firm level, state‑owned enterprises show a stronger swing toward caution than private firms, likely because their digital projects are embedded in stricter rules, oversight, and political expectations.

Surprising payoff: more innovation, not less

One might fear that more cautious CEOs would starve innovation. Instead, the authors find the opposite: firms that advance further in digital transformation invest more in research and development and generate more patents. The character of innovation changes. Rather than a giant leap into the unknown, projects are broken into smaller, faster experiments guided by data and continuous feedback. Digital tools help companies test ideas cheaply, monitor performance in real time, and weed out bad bets early. As a result, even a risk‑averse CEO can feel comfortable backing innovation because the downside is better measured and controlled, while the upside remains attractive.

What this means for the future of leadership

For a lay reader, the key message is that going digital quietly rewires how corporate leaders think about danger and opportunity. By clearing away some of the fog around operations and markets, digital tools make risks more visible—and visibility often breeds caution. Yet this does not spell the end of bold ideas. Instead, the study suggests that the most successful digital firms will be those that pair rich data and strong risk controls with incentives and cultures that still encourage exploration. Boards and policymakers, the authors argue, should recognize that technology strategies and leadership traits must fit together: the same digital dashboards that help a cautious CEO sleep at night can, under the right conditions, also power the next wave of innovation.

Citation: Bao, X., Lan, M., Li, N. et al. The digital transformation, corporate uncertainty, and CEO risk preference. Sci Rep 16, 9310 (2026). https://doi.org/10.1038/s41598-026-40064-x

Keywords: digital transformation, CEO behavior, risk aversion, corporate uncertainty, innovation investment