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The effect of digital transformation on firm performance: evidence from Swedish listed companies

Author

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  • Maha Khemakhem Jardak
  • Salah Ben Hamad

Abstract

Purpose - The objective of this research is to examine empirically the effects of digital maturity (DM) on the firm's financial performance as measured by return on assets (ROA), return on equity (ROE) and Tobin's Q. Design/methodology/approach - The authors use a panel data sample of 92 observations collected from 23 listed firms on Sweden's stock exchange over four years, 2015–2018. The authors hand collect DM from the digital leader's reports and collect financial data from DataStream. Using both static and dynamic panel (generalized method of moments (GMM) estimation) regression models to perform endogeneity problem, the authors explore the impact of the DM index on ROA, ROE and Q of Tobin. Findings - The results show that DM has a negative effect on ROA and ROE but a positive effect on Q of Tobin. This negative relationship can be explained, by the fact that information technology (IT) investment and the DM could take years to be materialized and to be captured by performance indicators. Company investment in IT will increase and basically the ROA will be negatively affected because the higher value of IT assets is not amortized. Nevertheless, in the long term, company can maximize its performance. The positive effect on Q of Tobin captures the long-run effect of digital transformation. Research limitations/implications - This research can be helpful for firms in their process of digital transformation to succeed with the change, create value and to understand the challenges they have to face. In the short term, firms undertaking digital transformation will face some financial difficulties which affect negatively their ROA and ROE, but in the long term they can maximize their performance (captured by Tobin’s Q) and improve their market value. Originality/value - In previous research, the impact of digital transformation on performance has been measured in terms of revenue growth, profit margins and in terms of earnings before interest and taxes (EBIT). Even if the authors have sufficient evidence of the positive effect of digital transformation on organizational performance, there is no support of the positive effect on financial performance. So, the authors try to fill this gap. This research has also the merit of examining this relationship empirically through a dynamic panel data estimation two-step system GMM, while the majority of previous studies are qualitative in nature based on interviews and questionnaires or simple correlations.

Suggested Citation

  • Maha Khemakhem Jardak & Salah Ben Hamad, 2022. "The effect of digital transformation on firm performance: evidence from Swedish listed companies," Journal of Risk Finance, Emerald Group Publishing Limited, vol. 23(4), pages 329-348, May.
    • Handle: RePEc:eme:jrfpps:jrf-12-2021-0199
    DOI: 10.1108/JRF-12-2021-0199
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    Cited by:

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    6. Rahat, Birjees & Nguyen, Pascal, 2024. "The impact of ESG profile on Firm's valuation in emerging markets," International Review of Financial Analysis, Elsevier, vol. 95(PA).
    7. Deheng Xiao & Can Zhang & Yongjian Huang, 2024. "Digital economy policy and enterprise digital transformation: Evidence from innovation and structural effect," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 45(4), pages 2348-2359, June.
    8. Quan‐Jing Wang & Hai‐Jie Wang & Gen‐Fu Feng & Chun‐Ping Chang, 2023. "Impact of digital transformation on performance of environment, social, and governance: Empirical evidence from China," Business Ethics, the Environment & Responsibility, John Wiley & Sons, Ltd., vol. 32(4), pages 1373-1388, October.
    9. Elina F. Hasan & Mohammad Abdalkarim Alzuod & Khalid Hasan Al Jasimee & Sajead Mowafaq Alshdaifat & Areej Faeik Hijazin & Laith T. Khrais, 2025. "The Role of Organizational Culture in Digital Transformation and Modern Accounting Practices Among Jordanian SMEs," JRFM, MDPI, vol. 18(3), pages 1-19, March.
    10. Xiankun Deng & Qingsong Hou & Jin Shen, 2024. "Can digital transformation reduce R&D investment disruption during the top executive transition period?," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 45(4), pages 1901-1926, June.
    11. Ying Wu & Yuanyue Deng, 2024. "Does digital transformation crowd out the employment of lower skill labor?," Bulletin of Economic Research, Wiley Blackwell, vol. 76(3), pages 726-748, July.
    12. Zang, Rong & Wei, Ya, 2026. "Digital transformation, financing constraints, and corporate earnings management," Finance Research Letters, Elsevier, vol. 90(C).
    13. Wang, Quan-Jing & Tang, Kai & Hu, Hai-Qing, 2022. "The impact of digital finance on green innovation: Evidence from provinces in China," Innovation and Green Development, Elsevier, vol. 1(1).
    14. Choi, Jihoon & Kim, Yeong Jae, 2025. "The impact of twin transition on firms' business performance: Empirical evidence from Korean manufacturing firms," Energy Economics, Elsevier, vol. 149(C).
    15. yeboah, samuel, 2026. "Digital Transformation and Cost Efficiency in Manufacturing Firms," MPRA Paper 129217, University Library of Munich, Germany, revised 28 Apr 2026.
    16. Lu, Chao & Zhao, Yiwen & Xing, Kai & Liu, Jinxin, 2025. "Digital transformation and corporate fraud: Evidence from China," International Review of Financial Analysis, Elsevier, vol. 106(C).
    17. Zhao Xicang & Muhammad Bilal & Wu Jiying & Jan Muhammad Sohu & Sadaf Akhtar & Muhammad Itzaz Ul Hassan, 2024. "Unraveling the Factors Influencing Digital Transformation and Technology Adoption in High-Tech Firms: The Moderating Role of Digital Literacy," SAGE Open, , vol. 14(4), pages 21582440241, November.
    18. Jie Li & Ning Ding & Sambock Bock Park & Zhu Zhang, 2025. "How Does Digital Transformation Impact ESG Performance in Uncertain Environments?," Sustainability, MDPI, vol. 17(10), pages 1-30, May.
    19. Yang, Hefan & Liu, Xilu & Meng, Yao & Feng, Baoyi & Chen, Zhijun, 2024. "Digital transformation and the allocation of decision-making rights within business groups – Empirical evidence from China," Journal of Business Research, Elsevier, vol. 179(C).
    20. Awais, Minahil & Afzal, Ayesha & Firdousi, Saba & Hasnaoui, Amir, 2023. "Is fintech the new path to sustainable resource utilisation and economic development?," Resources Policy, Elsevier, vol. 81(C).
    21. Yu, HuiRu & Shu, Kedong & Ni, Zeqiang & Liu, Qing & Li, ShuaiHang, 2025. "Does big data promote firms’ leverage ratios? Evidence from China’s national comprehensive big data pilot zones," Economic Analysis and Policy, Elsevier, vol. 87(C), pages 1817-1833.
    22. Andrea Billi & Alessandro Bernardo, 2025. "The Effects of Digital Transformation, IT Innovation, and Sustainability Strategies on Firms’ Performances: An Empirical Study," Sustainability, MDPI, vol. 17(3), pages 1-19, January.
    23. Tu, Jie & Li, Zhuohang & Lei, Zhiqing & Zhang, Hanyun & Liu, Sichen, 2026. "Digital intelligence transformation, patient capital, and the upgrade of corporate human capital," Finance Research Letters, Elsevier, vol. 88(C).
    24. Wang, Xiaoran & Ibrahim, Haslindar, 2024. "Unveiling the effects of mineral markets, fintech and governance on business performance: Evidence from China," Resources Policy, Elsevier, vol. 91(C).

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