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The nexus between data analytics and firm performance

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  • Raazia Gul
  • Nazima Ellahi

Abstract

The increased access and availability of information technology solutions have brought structural shifts in traditional business models, processes, and activities worldwide. As a result, the innovative ways of doing business and practices have disrupted the traditional businesses and technologies. This study investigates the impact of investment in data analytics on the financial performance of banks in Pakistan. A sample of 32 banks including commercial and microfinance banks for 2010 to 2019 was selected. Random effect panel estimation and instrumental variable two-stage least square were employed to quantify the impact of data analytics on firm performance. The results indicate that investment in data analytics increases the productivity of banks by 10%. However, the impact of investment in DA on profitability measures including return on assets, return on equity, and net interest income was negative, reflecting the “profitability paradox.” In the current era of digitalization, the banks need to invest in innovative technologies which have analytical capabilities to remain competitive and sustainable.

Suggested Citation

  • Raazia Gul & Nazima Ellahi, 2021. "The nexus between data analytics and firm performance," Cogent Business & Management, Taylor & Francis Journals, vol. 8(1), pages 1923360-192, January.
    • Handle: RePEc:taf:oabmxx:v:8:y:2021:i:1:p:1923360
    DOI: 10.1080/23311975.2021.1923360
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    Cited by:

    1. Raazia Gul & Mamdouh Abdulaziz Saleh Al-Faryan, 2023. "From insights to impact: leveraging data analytics for data-driven decision-making and productivity in banking sector," Palgrave Communications, Palgrave Macmillan, vol. 10(1), pages 1-8, December.
    2. Freire de Souza, Meiry Altino & Aguilar Madeira, Maria José & Carvalho, Luísa & Filipe Alexandre, Pereira Duarte & Lurdes, Simão, 2024. "Confluence of Factors that Influence Business Model by Digitalisation and Industry 4.0 Technologies," Cuadernos de Gestión, Universidad del País Vasco - Instituto de Economía Aplicada a la Empresa (IEAE).
    3. Tian, Meng & Chen, Yang & Tian, Guanghao & Huang, Wei & Hu, Chuan, 2023. "The role of digital transformation practices in the operations improvement in manufacturing firms: A practice-based view," International Journal of Production Economics, Elsevier, vol. 262(C).

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