Purpose: This study investigates the role of interlocking director networks (IDN) in driving corporate digital transformation (CDT) and explores the moderating role of agency costs, diversification and financial distress. Design/methodology/approach: The analysis uses data from Chinese A-share listed companies on the Shanghai and Shenzhen stock exchanges from 2006 to 2021. A two-way fixed-effects model is employed to assess the impact of IDNs on CDT. Findings: The results indicate that IDNs positively affect CDT. Furthermore, this effect is enhanced by agency costs and financial distress, while diversification acts as a negative moderator. Originality/value: Informal institutions such as IDNs play a significant role in corporate governance in China’s relational society. This study focuses on the influence of informal institutions on digital transformation, expanding the understanding of the economic consequences of IDNs and enriching the literature on factors influencing digital transformation.