Does technological investment effect the valuation and profitability of Indian banks? Using shareholder activism as moderator

Abstract

This paper aims to assess the impact of technological investment on the valuation and profitability of Indian banks. Furthermore, this study analyses the moderating effect of shareholder activism (SHA) on the association of Fintech, valuation and profitability. The research involves a balanced static panel data comprising of 23 commercial Indian banks over a span of 15 years between the years 2010–2024. The outcomes show that there is a positive association between the technological investment and valuation as well as profitability. The moderating influence of SHA has inconsistent and mixed results. This demonstrates that the internal strategies of the Indian banks are major motivation behind technology investment decisions, as opposed to the shareholders. These results would correlate to the resource-based view (RBV) theory, which highlights that specific abilities by investing in technologies and internal strategy are strategic resources to enhance profitability and valuation. The study sample will be restricted to the Indian commercial banks and will not be extended to other financial institutions. The study also provides practical implications that are valuable and can be used in relation to digital transformation, SHA and the performance of banking industry in India. The study contributes to the existing body of research and provides a new contribution by assessing the impact of technology investment on profitability and valuation at the same time under the moderating effect of SHA. The paper also uses the RBV theory to acquire an in-depth interpretation of banks.