Journal of
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year 100
 

Forum | Papers » Innovation, profitability and financial stability in banks in the era of digital revolution

Innovation, profitability and financial stability in banks in the era of digital revolution

Giusy Chesini, Elisa Giaretta
June 2019 - n. 6
Keywords: Rivoluzione digitale, innovazione, online banking, digital banking, profittabilità, banche statunitensi, Z-score
Jel codes: G21, G28, P51

The digital revolution has given banks new opportunities to structurally change their traditional business through massive investments in innovation. At the same time, banks are facing new challenges related to the entry of new competitors and to the need to comply to stringent prudential regulation. Thus, given the current challenging environment, we analyse how investments in innovation impact on a sample of 151 Us listed banks in 2007-2017. The profitability is measured by Return on Assets (Roa) and the risk is estimated by the index of probability of failure Z-score. Results demonstrate that investments in innovation have a positive effect on profitability, however increase risk; consequently, investing in innovation is a double-edge sword. Furthermore, the presence of physical branches has no effects.

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