The Interplay of Digital Maturity, Financial Performance, and Stock Returns in Indonesian Publicly Listed Banks

Abstract

Indonesia’s banking sector is undergoing a digital transformation driven by Industry 4.0. This study examines how digital maturity and financial performance, measured by Return on Assets (ROA) and Net Interest Margin (NIM), influence the stock performance of publicly traded Indonesian banks. Employing a quantitative approach, this study measures digital maturity by analyzing the frequency of technology-related terms in annual reports using NVivo software. Panel data regression with EViews software is then used to assess the impacts of digital maturity, ROA, and NIM on stock performance. The study reveals a positive and statistically significant relationship between ROA and stock returns, while digital maturity and NIM do not exhibit statistically significant effects. These findings suggest that investors prioritize financial strength and efficient asset management over digital activities when evaluating bank performance. The study concludes that digital maturity alone does not significantly influence stock returns, highlighting the need for banks to effectively translate digital initiatives into tangible financial benefits and clearly communicate these outcomes to investors. This research contributes to the existing body of knowledge on digital transformation and financial performance in the banking sector, offering valuable insights for investors and bank management decision making.