The removal of private capital restrictions: Impacts on enterprise digital transformation

• Presents the first causal evidence that removing private capital restrictions accelerates enterprise digital transformation, with effects 32 % stronger for state-owned firms. • Develops a novel endogenous growth framework integrating deregulation dynamics with firm-level technology adoption. • Constructs an original digital transformation index using machine learning text analysis of 37,000+ corporate reports. • Reveals significant heterogeneity: coastal firms and large manufacturers benefit disproportionately from deregulation. • Provides policymakers with a differentiation framework for targeting digital transformation policies. This study investigates the causal impact of lifting private capital restrictions on enterprise digital transformation in China. Combining an endogenous growth framework with a multi-period Difference-in-Differences (DID) design, we demonstrate that deregulation significantly enhances firms' digital capabilities. The treatment effects exhibit marked heterogeneity: (a) firms with concentrated ownership or larger scale experience stronger impacts, and (b) coastal locations and economically advanced regions show more pronounced responses. Our contribution provides the first integrated analysis of how regulatory reforms drive enterprise technology adoption through multiple channels. The results suggest policymakers should develop differentiated implementation strategies accounting for firm characteristics and regional conditions to optimize digital transformation outcomes.