Elvira Cantika Daeli

The rapid advancement of digital transformation has brought significant changes to the banking industry, raising questions about its impact on financial performance. This study aims to analyze the effects of digital transformation on the profitability of Indonesian commercial banks listed on the Indonesia Stock Exchange (IDX) during the 2018–2023 period. Utilizing a sample of 216 observations derived from 47 banks listed on the Indonesia Stock Exchange, the study employed quantitative panel data regression techniques to assess the relationship between digital transformation and key financial metrics, with the data structure as an unbalanced panel. The findings indicate that digital transformation measured through textual analysis negatively and significantly impacts both ROA and ROE, with coefficients of –0.202 (p-value = 0.001) and –1.022 (p-value = 0.022), respectively. Digital transformation measured through sentiment analysis negatively and significantly affects ROA with a coefficient of –0.746 (p-value = 0.044), though it does not significantly impact ROE (coefficient = –1.740, p-value = 0.423). The resource-based view emphasizes that strategic resource planning and intelligent resource allocation are required to convert digital transformation initiatives into a sustainable competitive advantage that generates profitability. These results highlight that while digital transformation initiatives may enhance operational efficiency, they come with short-term costs to profitability. The study also underscores the importance of aligning digital transformation strategies with long-term financial objectives to ensure sustainable growth and profitability in the banking sector.