Digitalization is a keyword not only mentioned in recent years but also strongly applied by financial institutions. However, the benefits of digitalization for banks remain an issue that needs to be investigated.
Therefore, this study is conducted to determine the role of digitalization in improving the financial performance of banks in the presence of financial stability as a mediating variable and nonperforming loans (NPLs) as a moderating variable. The research was conducted by African banks between 2000 and 2021.
Using panel data, the results showed that digitalization has a positive and significant effect on the performance of African banks. Similarly, the results showed that the financial stability of African banks plays a mediating role between digitalization and performance.
However, the effect of digitalization on the performance of African banks goes through their financial stability, which verifies its mediating role. Similarly, this study’s results showed that NPLs have a moderating role between digitalization and bank performance. Indeed, this paper found that NPLs play a braking role that minimizes the effect of digitalization on improving the financial performance of banks.
