Digital Transformation and Firm Performance: Evidence from Indonesian Listed Banks

Afridian Wirahadi Ahmad; Efrizal Syofyan; Dina Patrisia

doi:10.55980/ebasr.v5i2.409

Authors

Afridian Wirahadi Ahmad Doctoral Program in Management Science, Universitas Negeri Padang, Padang, Indonesia
Efrizal Syofyan Universitas Negeri Padang, Padang, Indonesia
Dina Patrisia Universitas Negeri Padang, Padang, Indonesia

DOI:

https://doi.org/10.55980/ebasr.v5i2.409

Keywords:

Digital Transformation , CEO Experience , Firm Performance , Banking Industry

Abstract

The rapid expansion of the digital economy has accelerated digital transformation across the banking industry, making digital technologies a strategic investment for enhancing competitiveness. However, whether digital transformation improves firm performance remains an open empirical question, particularly in emerging markets. This study investigates the effect of digital transformation on the financial performance of Indonesian listed banks and examines whether CEO experience moderates this relationship. Using a purposive sampling approach, the study analyzes 430 firm-year observations of banks listed on the Indonesia Stock Exchange during 2013–2022. Ordinary Least Squares (OLS) regression is employed as the primary estimation method, while System Generalized Method of Moments (Sys-GMM) and an alternative profitability measure are used to assess the robustness of the findings. The empirical results reveal that digital transformation has a significant negative effect on firm performance, suggesting that investments in digital assets do not immediately generate financial benefits. Furthermore, CEO experience does not significantly moderate the relationship between digital transformation and firm performance. Additional heterogeneity analysis indicates that the negative effect is more pronounced among private banks and smaller banks, whereas it is insignificant for state-owned banks. These findings contribute to the literature on digital transformation by highlighting that digital investments alone are insufficient to enhance firm performance without complementary organizational capabilities and effective implementation strategies.

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