At least from what we know from gameplay, he can only remain in his shapeshifting form for a short period of time.

I'm guessing that the human figure he uses(guy with beard) that's in all the games is his "true form" in the sense that he used some high level magic spell to take that form permanently. Whenever we see him in Outworld chilling out talking to people like Quan Chi and Kahn he is in that human form too, so it's not like he walks around in his demon form all the time and just morphs into a human for the tournaments.