The Impact of Digital Transformation on the Financial Performance of Banks: An Applied Study on a Sample of Commercial Banks Listed on the Iraq Stock Exchange

<ns3:p>Digital transformation is one of the most serious contemporary strategies founded on the acceptance of digital systems that can meet the growing needs of customers, who demand banking services quickly, precisely, of top quality, and at an affordable price. This helps lower operational expenses and allows banks to gain a competitive edge that increases their performance level. This study seeks to establish how much digital transformation impacts the performance of banks, given the idea of digital transformation as a pressing requirement for the survival, existence, and competitive ability of banks in the Fifth Industrial Revolution era. To achieve this objective, a descriptive–analytical approach was adopted to determine the nature of the relationship between the two variables. Digital transformation was measured based on the number of disclosures related to it in the management reports of the sampled banks, according to what is known as textual data mining, using the LIWC (Linguistic Inquiry and Word Count) program as the best methodology to express it. Financial performance was measured using both return on total assets (ROA) and Tobin’s Q indicators. The Regression analysis method was applied using panel data to determine the effect of digital transformation on financial performance. The study concluded that digital transformation has a statistically significant inverse effect on financial performance. Therefore, commercial banks listed on the Iraq Stock Exchange are required to increase their investments in digital technologies and enhance their cybersecurity to maintain their market share amidst rising competition, given that digital transformation is inevitable for their survival and continuity.</ns3:p>