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The Digitalization Transformation of Commercial Banks and Its Impact on Sustainable Efficiency Improvements through Investment in Science and Technology

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  • Lihua Zuo

    (School of Economics and Management, Beijing Jiaotong University, Beijing 100044, China)

  • Jack Strauss

    (Reiman School of Finance, University of Denver, 2101 S. University Blvd, Denver, CO 80208, USA)

  • Lijuan Zuo

    (School of Economics and Management, Beijing Jiaotong University, Beijing 100044, China)

Abstract

The COVID-19 epidemic has accelerated the digital economy’s pervasiveness throughout the Chinese economy, leading to a sharp rise in demand for “contactless” services in the financial industry. We examine the digital transformation of the Chinese banking industry using the DEA–Malmquist index method, supplemented by a distance function and time to compare the dynamic changes of productivity. Our paper then conducts an empirical study on the digital transformation of Chinese commercial banks based on their improvements in efficiency. We analyze banks with superior efficiency in science and technology investment and evaluate their digital maturity and digital transformation experience. Results show that digitalization investment has contributed to substantial production efficiency improvement for commercial banks; however, heterogeneity exists across banks. We further advocate a path for banks’ digital transformation based on theoretical research and empirical digital transformation experience in this area.

Suggested Citation

  • Lihua Zuo & Jack Strauss & Lijuan Zuo, 2021. "The Digitalization Transformation of Commercial Banks and Its Impact on Sustainable Efficiency Improvements through Investment in Science and Technology," Sustainability, MDPI, vol. 13(19), pages 1-17, October.
    • Handle: RePEc:gam:jsusta:v:13:y:2021:i:19:p:11028-:d:650157
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    References listed on IDEAS

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    Cited by:

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    3. Filipovska Olivija, 2023. "General Aspects of Bank Strategy on the Digital Transformation in North Macedonia," Zagreb International Review of Economics and Business, Sciendo, vol. 26(2), pages 203-214.
    4. de Paula Pereira, Gustavo & de Medeiros, Janine Fleith & Kolling, Camila & Ribeiro, José Luis Duarte & Morea, Donato & Iazzolino, Gianpaolo, 2024. "Using dynamic capabilities to cope with digital transformation and boost innovation in traditional banks," Business Horizons, Elsevier, vol. 67(4), pages 317-330.
    5. Kayenaat Bahl & Ravi Kiran & Anupam Sharma, 2023. "Scaling Up Banking Performance for the Realisation of Specific Sustainable Development Goals: The Interplay of Digitalisation and Training in the Transformation Journey," Sustainability, MDPI, vol. 15(18), pages 1-22, September.
    6. Sun, Xiaoyan & Xie, Xuanli, 2024. "How does digital finance promote entrepreneurship? The roles of traditional financial institutions and BigTech firms," Pacific-Basin Finance Journal, Elsevier, vol. 85(C).
    7. Nikola Stefanovic & Lidija Barjaktarovic & Alexey Bataev, 2021. "Digitainability and Financial Performance: Evidence from the Serbian Banking Sector," Sustainability, MDPI, vol. 13(23), pages 1-15, December.
    8. Ting Li Liu & Muhammad Mateen Naveed & Sohaib Mustafa & Muhammad Tahir Naveed, 2024. "Analysing the impact of digital technology diffusion on the efficiency and convergence process of the commercial banking industry of Pakistan," Palgrave Communications, Palgrave Macmillan, vol. 11(1), pages 1-27, December.

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