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Can setting up inside debt accelerate the bank's digital transformation? Evidence from China

Yuchen Bian (Glorious Sun School of Business and Management, Donghua University, Shanghai, China)
Haifeng Gu (Glorious Sun School of Business and Management, Donghua University, Shanghai, China)

Baltic Journal of Management

ISSN: 1746-5265

Article publication date: 2 February 2024

Issue publication date: 6 May 2024

104

Abstract

Purpose

Digital transformation is essential for commercial banks to maintain long-term competitiveness in the digital economy era. This study aims to investigate the relationship between inside debt and the bank's digital transformation.

Design/methodology/approach

This study set up a quasi-natural experiment based on implementing the executive compensation deferral system in the Chinese banking industry. Using the annual panel data of 180 commercial banks in China from 2007 to 2021, this study employed the difference-in-differences (DID) method to conduct an empirical analysis.

Findings

This study confirms a significant statistical relationship between inside debt and the bank's digital transformation, and managerial myopia is the transmission channel of inside debt affecting the bank's digital transformation. Furthermore, the development of Internet finance and the enhancement of bankers' confidence will improve the contributions of inside debt to the bank's digital transformation.

Originality/value

This study contributes to the literature on inside debt and the bank's digital transformation. It has specific policy value for the scientific design of the banking compensation mechanism and accelerating banks' digital transformation.

Keywords

Acknowledgements

This work was supported by the Humanistic and Social Science Planning Fund of the Ministry of Education (20YJA790014) and the Fundamental Research Funds for the Central Universities and Graduate Student Innovation Fund of Donghua University (CUSF-DH-D-2023050).

Citation

Bian, Y. and Gu, H. (2024), "Can setting up inside debt accelerate the bank's digital transformation? Evidence from China", Baltic Journal of Management, Vol. 19 No. 2, pp. 270-287. https://doi.org/10.1108/BJM-05-2023-0176

Publisher

:

Emerald Publishing Limited

Copyright © 2024, Emerald Publishing Limited

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