The Impact of Bank Digital Transformation on the Financial Performance of Commercial Banks

Abstract

Advances in technology have fueled industrial development and industry change. Digital transformation (DT) arises from integrating digital technology into traditional industries. The convergence of digital technology and traditional finance, giving rise to fintech, is progressively reshaping the current financial service model. DT empowers commercial banks to unlock the value of data as a production factor, enabling the provision of diverse financial products and services that offer crucial financial support for the digital economy. This study aims to investigate the link between commercial banks’ DT and their Financial Performance (FP), along with identifying influencing factors. Employing mechanism analysis, the research utilizes data from China’s commercial banks from 2011 to 2021. Empirical fixed-effect regression analysis is used to examine the impact of DT on FP, accounting for mediating effect. The results suggest that bank digital transformation (BDT) improves the FP of commercial banks. Moreover, bank efficiency, operational capacity, and profitability act as mediators in the correlation between BDT and the FP of commercial banks. This study concentrates on Chinese commercial banks to assess the impacts of their DT, adding to the current research on this subject. It also provides valuable insights for investors considering commercial banks, holding significant practical importance.