Digital Transformation and Sustainable Banking Performance: The Role of ESG, Risk Management, and Operational Efficiency
Author(s)
Shohaib Raza Warraich , Dildar Malik ,
Download Full PDF Pages: 01-18 | Views: 10 | Downloads: 2 | DOI: 10.5281/zenodo.21969990
Abstract
The banking industry is experiencing rapid digital transformation driven by technological advancements, evolving customer expectations, and increasing sustainability requirements. This study investigates the impact of digital transformation on sustainable banking performance and examines the mediating roles of Environmental, Social, and Governance (ESG) practices, risk management effectiveness, and operational efficiency. Grounded in the Resource-Based View (RBV), Dynamic Capability Theory (DCT), and Stakeholder Theory, the study proposes an integrated framework explaining how digital capabilities contribute to sustainable value creation within financial institutions. Using a quantitative research design, secondary data were collected from publicly listed commercial banks for the period 2018–2024. Partial Least Squares Structural Equation Modelling (PLS-SEM) was employed to evaluate the proposed relationships and mediation effects. The findings reveal that digital transformation significantly enhances sustainable banking performance both directly and indirectly. ESG practices, risk management effectiveness, and operational efficiency were found to partially mediate the relationship between digital transformation and sustainable banking performance. The results suggest that banks with higher levels of digital maturity are better positioned to strengthen sustainability initiatives, improve governance and risk controls, optimize operational processes, and achieve superior long-term performance. This study contributes to the growing literature on digital transformation and sustainable finance by providing a comprehensive framework that integrates technological, organizational, and sustainability dimensions. The findings offer valuable implications for banking executives, regulators, investors, and policymakers seeking to promote sustainable and resilient banking systems in an increasingly digital economy
Keywords
Digital Transformation; Sustainable Banking Performance; ESG Practices; Risk Management Effectiveness; Operational Efficiency.
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