ROLE OF TECHNOLOGICAL INNOVATION AND FINANCIAL PERFORMANCE

Abstract

This thesis explores the relationship between technological innovation and financial performance in Nepalese commercial banks, focusing on major institutions such as Everest Bank, Himalayan Bank, Nepal Investment Mega Bank, Siddhartha Bank, and NIC Asia Bank. The study aims to assess the impact of technologies like mobile banking, internet banking, and ATMs on financial performance indicators, particularly Return on Assets (ROA) and Return on Equity (ROE), over the period from 2013/14 to 2022/23. Utilizing both descriptive and analytical approaches, the research analyzes secondary data sourced from annual reports and official bank websites. The findings reveal mixed results, with technological advancements initially enhancing customer engagement but showing a limited and, at times, negative impact on financial performance. Correlation and regression analyses indicate significant negative relationships between ATMs, mobile banking, and ROA, while the impact on ROE remains statistically insignificant. The regression model's low explanatory power further suggests that factors beyond technological innovation play a crucial role in determining bank profitability. The study concludes that while technological innovations have grown significantly in Nepalese banks, their effect on financial performance remains modest, highlighting the need for a balanced approach to technology investments. The implications for policymakers, banking institutions, and future researchers emphasize the importance of strategic planning and the exploration of additional factors influencing financial outcomes in the banking sector.