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Navigating Financial Risk in the Digital Age: The Mediating Role of Performance and Indebtedness

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  • Siham Slassi-Sennou

    (ERMOT Laboratory, FSJES—Fez, Sidi Mohamed Ben Abdellah University, Fez 30080, Morocco)

  • Mourad Es-salmani

    (Multidisciplinary Research Laboratory LAREM, HECF Business School, Fez 30000, Morocco)

Abstract

In the context of an increasingly digital economy, firms are rapidly adopting technological innovations to bolster financial resilience and competitiveness. However, the quantitative impact of digital transformation on key financial outcomes—specifically performance, indebtedness, and risk—remains underexplored. This study investigates the extent and pathways through which digital transformation influences financial structures and stability. Employing Structural Equation Modeling (SEM) on firm-level survey data, the analysis reveals that digital transformation significantly enhances financial performance (β = 0.538, p < 0.01). Improved performance, in turn, leads to substantial reductions in firm indebtedness (β = −0.591, p < 0.01) and financial risk (β = −0.124, p = 0.021). While digital transformation does not directly affect indebtedness, it mitigates financial risk indirectly through two mediating variables: financial performance and firm indebtedness (mediated effects: β = −0.221 and β = −0.318, respectively; both p < 0.01). These findings underscore the financial value of digital initiatives, highlighting their role in enhancing performance and reducing financial vulnerabilities. The study offers strategic insights for managers and policymakers aiming to leverage digital transformation for financial optimization.

Suggested Citation

  • Siham Slassi-Sennou & Mourad Es-salmani, 2025. "Navigating Financial Risk in the Digital Age: The Mediating Role of Performance and Indebtedness," JRFM, MDPI, vol. 18(6), pages 1-18, June.
    • Handle: RePEc:gam:jjrfmx:v:18:y:2025:i:6:p:325-:d:1677470
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    References listed on IDEAS

    as
    1. Juan He & Xiaodong Du & Wei Tu, 2024. "Can corporate digital transformation alleviate financing constraints?," Applied Economics, Taylor & Francis Journals, vol. 56(20), pages 2434-2450, April.
    2. Lei Guo & Luying Xu & Junyi Wang & Jingwen Li, 2024. "Digital transformation and financing constraints of SMEs: evidence from China," Asia-Pacific Journal of Accounting & Economics, Taylor & Francis Journals, vol. 31(6), pages 966-986, November.
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