Digital Transformation and Performance of Commercial Banks in China: Effect and Mechanisms

다국어 초록 (Multilingual Abstract)

Purpose – Digital transformation (DT) involves integrating digital technologies into traditional industries. The convergence of digital technology and traditional finance has given rise to fintech and is progressively reshaping the current financial service models. The purpose of this study is to investigate how digital transformation affects the performance of commercial banks in China. Commercial banks in China are showing different patterns compared to commercial banks in other countries because they are heavily controlled by the government. Furthermore, we also study the mechanisms that influence under these characteristics.
Design/Methodology/Approach – Analyzing data from Chinese listed and unlisted commercial banks from 2011 to 2023 using a fixed-effects regression analysis, this study explores the impact of bank DT (BDT) on commercial banks’ financial performance (FP), and the factors influencing this relationship.
Findings – The findings reveal that BDT significantly enhances commercial banks’ FP. The mechanism analysis results further show that commercial banks’ DT contributes to improving FP by enhancing their efficiency, operational capabilities, and profitability.
Research Implications – This study reveals the contributions of banks’ DT, enriches related research on DT, and provides insights for the government. The government should provide policy support for commercial banks to continuously implement DT. At the same time, commercial banks should be supervised to prioritize and strengthen risk prevention and control measures during the DT period.