Estimating Organizational Readiness for Digital Transformation Using Disclosed Financial Data: Development of a Proxy Index and Panel Data Analysis
Keywords:
تحول دیجیتال، آمادگی تحول دیجیتال، شاخص جانشین، دادههای تابلویی، یادگیری ماشینAbstract
The purpose of this study was to develop and validate a financial-data-based proxy index for estimating organizational readiness for digital transformation and to examine the predictive role of financial indicators in explaining such readiness. This applied study employed panel data analysis using audited financial statements of publicly listed companies in Iran between 2020 and 2024. The final sample consisted of 29 firms, yielding 145 firm-year observations. A Digital Transformation Readiness Index (DTI) was constructed by combining standardized measures of return on assets, return on equity, revenue growth, firm size, and capital structure. Panel regression models were used to test the proposed relationships, while machine-learning techniques, including Linear Regression, Random Forest, Gradient Boosting, and Support Vector Regression, were applied to evaluate predictive performance and reproduce the proposed index. The fixed-effects panel model demonstrated the best fit and explained approximately 64% of the variation in the DTI. Return on assets, return on equity, revenue growth, and firm size exhibited significant positive effects on digital transformation readiness, whereas financial leverage showed a significant negative effect. The average DTI increased from 0.47 in 2020 to 0.58 in 2024, indicating a gradual improvement in firms’ financial readiness for digital transformation. Among predictive models, Linear Regression achieved perfect reconstruction of the index (R² = 1.00), while Gradient Boosting outperformed other nonlinear approaches with an R² of approximately 0.86. The findings suggest that disclosed financial information can serve as a reliable signal of organizational readiness for digital transformation. Strong profitability, organizational growth, and larger firm size enhance readiness, whereas excessive leverage constrains investment flexibility and digital transformation capacity. The proposed proxy index provides an objective, data-driven tool for identifying organizations with greater potential to undertake successful digital transformation initiatives.
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