Transforming financial sustainability: the serial mediation of digitalization and financial inclusion through digital governance in bank

Purpose: Digital strategy is recognized as an important component of organizational strategy; however, its benefits in terms of financial sustainability are still unclear. Drawing on the dynamic resource dependence and agency theory, this research aims to examine the influence of digital governance (DGV) on a bank’s financial sustainability (FS) with the mediating role (individually and sequentially) of digitalization (DGT) and financial inclusion (FI). Design/methodology/approach: Data were collected from the yearly financial statements of the commercial banks in China and Pakistan between 2017 and 2023. This study used the generalized methods of moments (GMM) and Hayes Macro 6 for robustness to investigate the proposed hypotheses. Findings: The findings show a favorable relationship between digital governance and financial sustainability. Furthermore, as hypothesized, the relationship between digital governance and banks’ financial sustainability is partially mediated by digitalization and financial inclusion, both individually and sequentially. Originality/value: This study mainly contributed to the literature in terms of adding (individual and sequential) mediating roles of digitalization and financial inclusion in the relationship between digital governance and financial sustainability. Contrary to previous studies, which isolate these factors, this paper provides the mechanism with a serial mediation model that explains how digital governance efforts, especially with the incorporation of IT-experienced directors on corporate boards, drive digital transformation and, in turn, contribute to a bank’s financial sustainability.