The Impact of the Level of Digital Transformation on Financial Performance Differences: Empirical Evidence from Saudi Commercial Banks | ||||
| مجلة جامعة الإسکندرية للعلوم الإدارية | ||||
| Volume 62, Issue 5, September 2025, Page 325-381 PDF (2.16 MB) | ||||
| Document Type: المقالة الأصلية | ||||
| DOI: 10.21608/acj.2025.451401 | ||||
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| Authors | ||||
| Sameer Mohammed Sindi1; Eman Ali Selem Salem2 | ||||
| 1Department of Finance and Economics Faculty of Business Administration, Taibah University, KSA | ||||
| 2Accounting Department, Faculty of Business Administration, Taibah University, KSA, Faculty of Commerce, Suez Canal University | ||||
| Abstract | ||||
| This study aims to analyze the differences in financial performance among Saudi commercial banks according to the level of digital transformation implementation, considering the financial characteristics of each bank as additional explanatory variables. The digital transformation was measured through a merged index consisting of six sub-components: Growth of digital customer base, use of digital banking services, customer satisfaction with digital services, efficiency of digital operations, digital innovation, and compliance with cybersecurity standards. To facilitate the analysis, the level of digital transformation was categorized into three distinct levels: (Low, Medium, and High), based on the combined scores of the sub-components mentioned above. This classification allows for a more detailed comparison of financial performance between banks with different degrees of digital advancement. The study relied on four key financial indicators: Return on Assets (ROA), Return on Equity (ROE), Earnings Per Share (EPS), and Cost to Income Ratio (C/I) to monitor the differences in financial performance between banks depending on their level of digital transformation. The study also addressed banks' financial characteristics such as capital adequacy ratio (CAR), liquidity coverage ratio (LCR), loan-to-deposit ratio (LDR), Loan Loss Coverage ratio (LLC), and Leverage ratio (LR) to analyze their role in explaining these differences. The study relied on a quantitative approach, using data for Saudi banks listed on the financial market during the period from 2019 to 2023. The data was analyzed using analysis of variance (ANOVA) to detect differences, and regression analysis to identify the variables that explain the differences in performance. The results showed that there were statistically significant differences in all financial performance indicators (ROA, ROE, EPS, C/I) attributable to the level of digital transformation, with higher digitized banks achieving better financial performance. Financial characteristics also proved to play an explanatory role in these differences, especially in ROE and C/I, while the relationship between the level of digital transformation and both ROA and EPS were not significantly affected by financial bank characteristics. These findings reflect the importance of understanding a bank's internal financial context when analyzing differences in the level of digital transformation outcomes and support the strategic orientation towards digital investment to enhance efficiency and profitability in the Saudi banking sector. | ||||
| Keywords | ||||
| cost-to-income ratio (C/I); earnings per share (EPS); financial bank characteristics; financial performance; level of digital transformation; return on assets (ROA); return on equity (ROE) | ||||
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