Peer Effects of Bank Digital Transformation Through Shareholder Networks

This study examines the peer effects of bank digital transformation facilitated by shareholder networks and explores the underlying mechanisms. A time-varying network is constructed based on common shareholder connections among banks, and a corresponding measure is developed to quantify peer effects in digital transformation. Using the Peking University digital transformation index together with ownership and financial data from CSMAR, an empirical analysis is performed on a panel of 114 Chinese commercial banks from 2010 to 2021 to evaluate these effects. Fixed-effects estimations indicate that bank digital transformation is significantly affected by peer effects transmitted through common shareholder connections, with a one-unit increase in peers’ digitalization index associated with a 0.151-unit rise in the focal bank’s index. These findings remain robust and economically meaningful across alternative specifications, including system GMM, IV/2SLS designs, and different ownership thresholds. Further analyses indicate that the peer effects operate through mechanisms such as intensified competition, enhanced information sharing, and pooled resources. However, such peer influence also exacerbates disparities in digital progress across the industry, reflecting a Matthew Effect in which leading banks consolidate their advantages. Heterogeneity analysis reveals that the peer effects are more pronounced among banks with larger workforces, more diversified operations, and higher ownership concentration. The findings of this study provide insights into how financial institutions can leverage technological innovations through network-based channels, offering practical implications for promoting industry-wide transformation in the digital economy era.