Influence of Digital Transformation on Financial Performance of Manufacturing Firms in The USA

Digital transformation (DT) is a fundamental shift in how organizations utilize technology to drive strategic initiatives, enhance operational efficiency, and deliver value to stakeholders. The USA holds the 1st rank in IMD World Digital Competitiveness Ranking, reflecting its strong emphasis on digital transformation. The impact of DT on financial performance of companies is a topic of great interest, with literature providing contradicting evidence of positive, negative, and uncertain effects. This paper explores how level of DT and level of it’s stages (inception stage, development stage and maturity stage) influences the financial performance of utility companies in the USA, using Return on Assets (ROA). The empirical analysis is based on 48 middle capitalization firms over a 14-year period, resulting in 658 observations after excluding missing data. Financial information was obtained via Bloomberg terminal, and Python software was applied to measure DT for each company. Digital mining technology was utilized to count the number of specific words related to DT in company's annual reports. The panel data analysis findings indicated a strong and beneficial impact of DT on the financial performance of companies, affirming the primary hypothesis presented in this paper. Additionally, the digital inception stage appeared not significant, while the digital development and digital maturity stages showed positive and significant effects, indicating the long-term impact of DT on financial performance. This paper opens 'black box' by applying stages of DT on company's financial performance and opens room for further research on this topic.