The Impact of Digital Transformation on Firms’ Financial Performance (An Empirical study on Egyptian stock listed Firms)

Purpose – Digital transformation (DT) is a strategic, long-term organizational initiative aimed at enhancing competitiveness and adaptability through the integration of digital technologies. This study aims to examine the impact of DT on firm performance from a financial perspective, using Return on Assets (ROA) as a key indicator.
Methodology – This paper constructs a Digital Transformation Index based on keyword frequency and disclosure analysis in annual reports and websites. The study analyzes a sample of 40 non-financial companies listed on the Egyptian Exchange (EGX 100) from 2020 to 2024. A pooled simple linear regression model was employed to test the relationship between digital maturity (measured by digital score per year) and financial performance (ROA).Introducing a new scaled index as a proxy for measuring digital transformation.
Findings – The results indicate that DT has a statistically significant positive effect on ROA, suggesting that firms with higher levels of digital engagement tend to achieve slightly better financial outcomes. However, the effect size is modest, with DT explaining only a small portion of profitability variation, reflecting the complex nature of firm performance. The study emphasizes that while digital efforts contribute positively, their full financial benefits likely depend on integration with broader strategic and operational capabilities.
Originality/value – This paper offers a novel approach to measuring DT by combining qualitative disclosure analysis with quantitative scoring. It contributes to the limited empirical literature on digital transformation in emerging markets especially in Egypt and provides practical insights for managers and policymakers seeking to link digital initiatives with measurable financial gains.
Contribution- Introducing a new scaled index as a proxy for measuring digital transformation.