Abstract: In the context of the digital economy era, enterprise digital transformation has become an important path to enable enterprises to develop new momentum. Based on the data experience of listed companies from 2001 to 2019, this paper explores the effect and specific mechanism of digital transformation on corporate profitability. The research found that the digital transformation of enterprises has significantly improved the profit margin of enterprises. This conclusion is still valid after further dealing with endogenous problems by using system GMM and tool variable method. Moreover, the digital transformation of enterprises has effectively promoted the improvement of enterprise profit margin through two mechanisms, namely, improving the production efficiency of enterprises and reducing the external transaction costs of enterprises. This not only expands the scope of research on the economic effects of enterprise digital transformation, but also provides some empirical basis for the formulation of digital related policies and driving enterprise digital transformation.

Key words: digital economy, enterprise digital transformation, enterprise profit rate, mechanism research