IDEAS home Printed from https://ideas.repec.org/a/gam/jjrfmx/v18y2025i6p325-d1677470.html

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

Author

Listed:
  • 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
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/1911-8074/18/6/325/pdf
    Download Restriction: no
    File URL: https://www.mdpi.com/1911-8074/18/6/325/
    Download Restriction: no
    ---><---

    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.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Li, Shu & Zhang, Xiaoyun, 2025. "Can digital transformation of enterprise improve the information environment of the capital market? ——Evidence from Analyst's perspective," International Review of Economics & Finance, Elsevier, vol. 97(C).
    2. Wu, Weihong & Zhou, Hui & Huo, Zheng, 2025. "The effect of issuers’ digital transformation on bond rating quality: Evidence from China’s bond market," Research in International Business and Finance, Elsevier, vol. 79(C).
    3. Wang, Mansi & Yu, Xinxin & Hong, Xinyi & Yang, Xiaotao, 2025. "Can digital finance promote green innovation collaboration in enterprises?," Global Finance Journal, Elsevier, vol. 65(C).
    4. Liu, Dongxia & Chen, Liming, 2025. "Supply chain innovation support policies, financing constraints, and corporate digital transformation," International Review of Financial Analysis, Elsevier, vol. 108(PA).
    5. Wei, Cui & Zhou, Hang & Zhang, Xinrui & Ouyang, Shuang, 2025. "The dark side of digital transformation: Digital washing and accounting conservatism," International Review of Economics & Finance, Elsevier, vol. 98(C).
    6. Zhuang, HanYu & Gao, Lei & Li, Jinhuan, 2026. "CEO digital background and corporate digitalization: the role of regional policy," Finance Research Letters, Elsevier, vol. 88(C).
    7. Zhang, Chenrui, 2025. "How does enterprise digital transformation affect the cost of debt financing? Based on the perspective of customer concentration risk," International Review of Economics & Finance, Elsevier, vol. 103(C).
    8. Hu, Bo & Li, Mingyan, 2025. "Industry concentration and the adoption of digital finance technology: Evidence from sports industries," Finance Research Letters, Elsevier, vol. 85(PE).
    9. Chen, Anqi & Lian, Zihan & Zhang, Zhida, 2025. "Do institutional investors’ site visits promote firm productivity? Evidence from China," Finance Research Letters, Elsevier, vol. 85(PD).
    10. Zhou, Zhongsheng & Yuan, Zhichao & He, Chao, 2025. "Can digital transformation promote firms' sustainable development? Evidence based on ESG performance," International Review of Financial Analysis, Elsevier, vol. 105(C).
    11. Zhao, Ningru & Liu, Lanlan & Chen, Youyang & Yu, Xiaoyu, 2025. "Can corporate digitalization deter leverage manipulation? Evidence from China," Finance Research Letters, Elsevier, vol. 84(C).
    12. Xue, Liuyang & Jiang, Shiyao & Wu, Nanxuan & Yin, Meng, 2025. "Effect of firm social status on ESG performance: Theoretical mechanism and heterogeneity analysis," International Review of Economics & Finance, Elsevier, vol. 99(C).
    13. Cuicui Chu & Youjin Lv, 2025. "Digital Finance, Financing Dilemma and Corporate Tax Avoidance——Empirical Evidence From A-Share Listed Companies in China," SAGE Open, , vol. 15(2), pages 21582440251, May.
    14. Kang, Weijing, 2025. "Impact and mechanisms of digital finance on corporate bond credit spreads in China," Finance Research Letters, Elsevier, vol. 82(C).
    15. Yang, Yang & Chen, Jingzhi & Liu, Shuwen & Li, Jun, 2025. "The impact of digital transformation on corporate shadow banking," International Review of Financial Analysis, Elsevier, vol. 108(PB).
    16. Jingjing Yao & Qian Bo & Yun Zhang, 2025. "Corporate Digital Transformation and Environmental Accounting Information Disclosure: A Dual Examination of Internal Empowerment and External Monitoring," Sustainability, MDPI, vol. 17(7), pages 1-20, March.
    17. Jia, Lele & Ren, Yahui, 2026. "Supply chain finance, financing constraints, and corporate new quality productivity," Finance Research Letters, Elsevier, vol. 88(C).
    18. Chen, Wen & Zhang, Qiuyue, 2025. "Can corporate climate risk drive digital transformation? Evidence from Chinese heavy-polluting enterprises," Technological Forecasting and Social Change, Elsevier, vol. 212(C).
    19. Li, Qinyang & Li, Mingrui & Li, Mengru & Li, Tao, 2025. "Digital ripples: The impact of customers' digital transformation on the financing constraints of suppliers," International Review of Financial Analysis, Elsevier, vol. 105(C).
    20. Huo, Peiyun & Wang, Shihuan & Qin, Dongqian, 2025. "Equity as armor: Building unbreakable supply chains through strategic ownership," Finance Research Letters, Elsevier, vol. 86(PE).

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:gam:jjrfmx:v:18:y:2025:i:6:p:325-:d:1677470. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: MDPI Indexing Manager The email address of this maintainer does not seem to be valid anymore. Please ask MDPI Indexing Manager to update the entry or send us the correct address (email available below). General contact details of provider: https://www.mdpi.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.