Based on the relevant theoretical analysis of corporate debt financing costs, this paper takes the small and medium-sized enterprises listed in China from 2009 to 2023 as samples, constructs digital transformation indicators, and empirically tests the impact of digital transformation of small and medium-sized enterprises on their debt financing costs and its mechanism by using the individual time two-way fixed effect model. The research results show that under the condition of fixed individuals and time, the digital transformation of SMEs can significantly reduce their debt financing costs and pass the robustness test. Further exploring the reasons, it is found that enterprise digital transformation can reduce the debt financing cost of SMEs by increasing the media’s attention to enterprises and enhancing the financial stability of enterprises. The study also found that the effect of digital transformation on the reduction of debt financing costs of SMEs is more obvious in non-state-owned enterprises or SMEs located in central and eastern regions or in regulated industries. This paper has enriched the research on the impact of digital transformation on microeconomic entities, provided new ideas for easing the financing constraints of SMEs, and also provided a reference for promoting differentiated support policies for enterprises’ digital transformation and the transformation of old and new driving forces in the real economy.
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