How does digital transformation impact bank performance?

Figures & data

Table 1. The variables defined

Variable name	Code	Measurement	Expected
Dependent variable
Bank performance	ROE	=return on equity
	ROA	=return on assets
Independent variables
Digital transformation	DT	Digital transformation level. It is measured through keywords related to digital transformation in the annual report.	+
Control variables
Bank size	SIZE	=ln(total assets)	+
COVID-19 pandemic	COVID	=0 if year<2020 and =1 if year≥2020	+
Loan growth	LOAN_ GROWTH	=(loant-loant-1)/loant-1	+
Non- performance loan	NPL	= Non- performance loan on total assets	+
GDP growth	GGDP	GDP growth (annual %)	+

Table 2. Descriptive

Variables	Mean	Sd	Min	Max
ROA	.009	.007	−.004	.036
ROE	.115	.079	−.046	.303
DT	46.201	35.952	1	219
SIZE	32.718	1.08	30.51	35.11
GGDP	4.84	1.9	1.69	6.47
LOAN_ GROWTH	.193	.111	−.11	.652
Observation=182

Table 3. Regression results with ROA

	(1)	(2)	(3)	(4)
ROA	POOLED OLS	FEM	REM	GMM
ROAt-1				0.765***
				(0.0926)
LnDT	-0.000165	0.000150	9.57e-05	-0.000652***
	(0.000675)	(0.000493)	(0.000495)	(0.000193)
COVID	0.0297***	0.00738	0.0169***	0.0119**
	(0.00795)	(0.00517)	(0.00459)	(0.00540)
SIZE	0.00233***	0.00849***	0.00456***	0.000895
	(0.000546)	(0.00145)	(0.000922)	(0.000594)
NPL	-0.0120	-0.0274	-0.0173	-0.0311
	(0.0525)	(0.0391)	(0.0394)	(0.0717)
GROWTH_LOAN	0.0145***	-0.000111	4.91e-05	0.0116**
	(0.00485)	(0.00302)	(0.00308)	(0.00472)
GGDP	0.00624***	0.00183*	0.00365***	0.00251**
	(0.00182)	(0.00110)	(0.00101)	(0.00112)
Constant	-0.108***	-0.281***	-0.163***	-0.0412*
	(0.0200)	(0.0441)	(0.0282)	(0.0235)
Observations	168	168	168	168
R^2	0.683	0.689
Number of banks		26	26	26
Hausman test		0.000
Autocorrelation test		0.000
Heteroskedasticicty test		0.000
AR(1)				0.001
AR(2)				0.299
Hansen test				0.587

Standard errors in parentheses

***p<0.01, **p<0.05, *p<0.1

Table 4. Regression results with ROE

	(1)	(2)	(3)	(4)
ROE	POOLED OLS	FEM	REM	GMM
ROEt-1				0.682***
				(0.0649)
LnDT	-0.00301	-0.00548	-0.00469	-0.00863***
	(0.00640)	(0.00586)	(0.00581)	(0.00227)
COVID	0.312***	0.0664	0.203***	0.0866*
	(0.0754)	(0.0614)	(0.0531)	(0.0517)
SIZE	0.0368***	0.109***	0.0537***	0.00889
	(0.00518)	(0.0173)	(0.00872)	(0.0146)
NPL	-0.974*	-0.879*	-0.778*	-1.330**
	(0.498)	(0.464)	(0.463)	(0.628)
GROWTH_LOAN	0.174***	0.000983	0.0158	0.158***
	(0.0460)	(0.0359)	(0.0366)	(0.0516)
GGDP	0.0676***	0.0191	0.0454***	0.0194*
	(0.0172)	(0.0131)	(0.0118)	(0.0111)
Constant	-1.516***	-3.537***	-1.900***	-0.338
	(0.189)	(0.524)	(0.270)	(0.476)
Observations	168	168	168	168
R^2	0.624	0.571
Number of banks		26	26	26
Hausman test		0.000
Autocorrelation test		0.000
Heteroskedasticicty test		0.000
AR(1)				0.005
AR(2)				0.215
Hansen test				0.436

Standard errors in parentheses

***p<0.01, **p<0.05, *p<0.1