Digital transformation is a key driver of corporate innovation in the digital economy, with significant implications for financing costs, especially the cost of equity capital. This research investigates the impact of digital transformation on reducing the cost of equity capital by enhancing both information disclosure and corporate governance. Specifically, it examines the effects related to information and governance. Based on empirical data from A-share listed firms in Shanghai and Shenzhen from 2010 to 2023, the following key conclusions emerge: First, digital transformation plays a significant role in decreasing the cost of equity capital. Second, it improves the transparency of information by elevating the quality of disclosures, which helps reduce information asymmetry, thereby further lowering equity costs. Third, digital transformation refines corporate governance frameworks, reduces agency costs, and boosts organizational efficiency, all contributing to a decline in the cost of equity capital. Moreover, the effects are notably stronger in larger corporations. This research offers insights into how digital transformation can lower financing costs.