The Effect of Digital Transformation for Sustainable Business: A Multiple Mediation Analysis

Abstract Digital transformation has become a cutting-edge tactic for companies looking to gain a competitive edge in the highly competitive and dynamic market of today's digital economy. Businesses in a wide range of sectors have undergone or are now undergoing digital transformation. This study investigates how digital transformation (DT) leads to sustainable business practice in top ten private banks in Ethiopia with a focus on the mediating role of, financial performance (FP) and innovation capability (IC). The study uses a quantitative research approach and Structural Equation Modeling (SEM) using Smart-PLS to analyze data collected from 340 respondents, comprising employees and banks stakeholders. The findings revealed that DT positively boosts FP by decreasing costs, and elevates innovation capability by creating sustainable and competitive business models. This study recommends banks to leverage DT by adopting cost efficient technologies, and fostering a culture of innovation in order to survive in this rapidly evolving financial sector.