Digital readiness and financial performance in the financial industry: evidence from emerging market economies

This study examines the impact of digital readiness on financial performance of listed firms in Brazil, Russia, India, China and South Africa. It is based on 1 224 firms across BRICS where 135, 41, 711 and 337 firms represent banks, insurance, investments and real estate industries, respectively. The Arbitrage Pricing Theory was extended by including the digital readiness component from the Network Readiness Index Framework. Generalized Method of Moments regression was used as the main data analysis model. Key findings are as follows: [1] The extended Arbitrage Pricing Theory and the longitudinal research design approach was found to be ideal for the study as supported by model statistics. [2] The current state of enabling infrastructure is not a key determinant of financial performance. [3] Internet affordability effects generally have a positive and significant impact on financial performance of banking and insurance firms. [4] Skills and education have positive and significant impact on financial performance of banking and insurance firms. [5] Financial performance in investments and real estate firms generally respond negatively to variations in digital readiness. [6] Market-based financial performance measures respond better to variations in digital readiness when compared to accounting-based measures of financial performance.
A research report submitted to the Faculty of Commerce, Law and Management, University of the Witwatersrand, in partial fulfilment of the requirements for the degree of Master of Management in the field of Digital Business.
Financial performance, Digital Readiness, Causality, Generalised Method of Moments, Brazil, Russia, India, China, South Africa