A Systematic Review of the Influence of Strategic Change on the Financial Performance of Financial Institutions

Strategic change serves as a critical mechanism for financial institutions navigating volatile markets and evolving regulatory landscapes. Organizations increasingly leverage digital transformation (DT) and structural consolidation to sustain competitive advantage and improve corporate health. This systematic literature review synthesizes global empirical evidence to evaluate how strategic shifts, specifically technological innovations and mergers and acquisitions (M&A), and their influence the financial and operational performance of financial institutions. The study reviews recent empirical, longitudinal, and econometric literature spanning 2012 to 2026 across diverse geographic markets, including Saudi Arabia, India, Turkey, China, Palestine, Vietnam, and Zimbabwe. The synthesis reveals that digital transformation generally elevates institutional performance by boosting Total Factor Productivity (TFP), enhancing operational efficiency, and reducing costs. However, these outcomes are highly contingent upon contextual variables. Large institutions and private banks realize more immediate financial gains (e.g., higher ROA and ROE) due to robust capital infrastructure and flexible governance. Conversely, public enterprises and institutions in underdeveloped ecosystems face severe infrastructure bottlenecks, low consumer digital literacy, or strategic misalignment. Furthermore, temporal lags and high upfront capital deployments frequently trigger short-term profitability declines before long-term economic gains materialize. Similarly, strategic consolidation via M&A presents a dual outcome; while mergers significantly bolster long-term solvency ratios and structural stability, they trigger immediate profitability contractions due to steep integration costs and cultural frictions. Strategic changes yield net-positive institutional growth but are bounded by short-term financial trade-offs and structural adjustment periods. To maximize performance, financial institutions must align digital and corporate restructuring strategies with rigorous international regulatory frameworks, invest heavily in change management, and maintain long-term capital commitments.

Strategic Change, Institutional Performance, Digital Transformation, Technological Innovation, Mergers and Acquisitions, Financial Sector, Total Factor Productivity

1. Abu-Saifan, S., & Nasser, R. (2026). Challenges of Digital Financial Services in Palestinian Banks. Middle East Journal of Banking and Finance, 12(1), 45-63. [Google Scholar] [Crossref]

2. Adeyemi, T., & Olawale, O. (2017). Diversification and Financial Performance of Nigerian Firms: Related vs. Unrelated Approaches. Nigerian Journal of Economics and Social Studies, 59(4), 202-223. [Google Scholar] [Crossref]

3. Ahmed, M., & Hamdan, A. (2019). Ownership concentration and strategic change: Evidence from Middle Eastern firms. International Journal of Business Governance and Ethics, 14(3), 231-249. https://doi.org/10.1504/IJBGE.2019.101830. [Google Scholar] [Crossref]

4. Akhter, S. H., Vveinhardt, J., & Streimikiene, D. (2021). Strategic change management in financial institutions. Sustainability, 13(3), 1342. [Google Scholar] [Crossref]

5. Allen, F., Carletti, E., & Cull, R. (2020). Financial crises and the real economy. Annual Review of Financial Economics, 12, 243-264. [Google Scholar] [Crossref]

6. Al-Mutairi, S., Al-Harbi, F., & Al-Qahtani, M. (2026). Digital Transformation and Bank Performance in Saudi Arabia. Journal of Banking and Finance Studies, 15(2), 134-150. [Google Scholar] [Crossref]

7. Anderson, R. C., Mansi, S. A., & Reeb, D. M. (2004). Board characteristics, accounting report integrity, and the cost of debt. Journal of Accounting and Economics, 37(3), 315-342. https://doi.org/10.1016/j.jacceco.2004.01.004 [Google Scholar] [Crossref]

8. Barros, C. P., & Wanke, P. (2019). Financial performance and the regulatory environment: evidence from banks in Latin America. Journal of Financial Regulation and Compliance, 27(4), 486-501. [Google Scholar] [Crossref]

9. Beck, T., Demirgüç-Kunt, A., & Levine, R. (2013). Financial institutions and markets across countries and over time: The updated financial development and structure database. World Bank Economic Review, 24(1), 77-92. [Google Scholar] [Crossref]

10. Bhagat, S., & Bolton, B. (2008). Corporate governance and firm performance. Journal of Corporate Finance, 14(3), 257-273. https://doi.org/10.1016/j.jcorpfin.2008.03.006. [Google Scholar] [Crossref]

11. Boateng, K., & Asante, E. (2023). Post-Restructuring Financial Performance in Ghanaian Banks: An Empirical Review. Ghana Journal of Banking and Finance, 7(1), 56-74. [Google Scholar] [Crossref]

12. Boubaker, S., Nguyen, D. K., & Nguyen, Q. N. (2020). Strategic management in the banking industry. Strategic Change, 29(2), 195-210. [Google Scholar] [Crossref]

13. Carpenter, M. A., & Westphal, J. D. (2001). The strategic context of external network ties: Examining the impact of director appointments on board involvement in strategic decision making. Academy of Management Journal, 44(4), 639-660. https://doi.org/10.5465/3069410. [Google Scholar] [Crossref]

14. Chen, J., Huang, Y., & Davison, R. M. (2020). Digital transformation and firm performance: Evidence from China’s banking industry. Information & Management, 57(8), 103364. [Google Scholar] [Crossref]

15. Chikodzi, D., & Mlambo, C. (2024). Restructuring Impacts on Zimbabwean Insurance Companies: Solvency and Profitability. African Journal of Risk and Insurance, 10(1), 25-41. [Google Scholar] [Crossref]

16. Daily, C. M., Certo, S. T., & Dalton, D. R. (2000). International handbook of organizational governance. Academy of Management Journal, 43(2), 214-225. [Google Scholar] [Crossref]

17. DeYoung, R., Evanoff, D. D., & Molyneux, P. (2009). Mergers and acquisitions of financial institutions: A review of the post-2000 literature. Journal of Financial Services Research, 36(2-3), 87-110. https://doi.org/10.1007/s10693-009-0040-4 [Google Scholar] [Crossref]

18. DeYoung, R., Evanoff, D. D., & Molyneux, P. (2013). Mergers and acquisitions of financial institutions: A review of the post-2000 literature. Journal of Financial Services Research, 45(2), 221-247. [Google Scholar] [Crossref]

19. Ezeani, E., & Okafor, P. (2020). Effects of Capital Reform on Nigerian Banks: Size and Profitability Implications. Nigerian Journal of Banking and Finance, 14(1), 78-95. [Google Scholar] [Crossref]

20. Fernandez, E., & Li, G. (2022). Stakeholder engagement and strategic change: A mixed-method study of European firms. Journal of Business Ethics, 175(2), 345-363. https://doi.org/10.1007/s10551-020-04523-7 [Google Scholar] [Crossref]

21. Finkelstein, S., & Hambrick, D. C. (1996). Strategic leadership: Top executives and their effects on organizations. West Publishing Company. [Google Scholar] [Crossref]

22. Focarelli, D., Panetta, F., & Salleo, C. (2016). Why do banks merge? Journal of Money, Credit and Banking, 36(6), 1047-1066. [Google Scholar] [Crossref]

23. Gomber, P., Koch, J. A., & Siering, M. (2017). Digital finance and FinTech: current research and future research directions. Journal of Business Economics, 87(5), 537-580. [Google Scholar] [Crossref]

24. Gonzalez, A., & Trujillo, M. (2021). Governance quality and strategic redirection after CEO turnover: An event study. Strategic Management Journal, 42(11), 2153-2172. https://doi.org/10.1002/smj.3278. [Google Scholar] [Crossref]

25. Hillman, A. J., & Dalziel, T. (2003). Boards of directors and firm performance: Integrating agency and resource dependence perspectives. Academy of Management Review, 28(3), 383-396. https://doi.org/10.5465/amr.2003.10196729 [Google Scholar] [Crossref]

26. Johnson, G., Scholes, K., & Whittington, R. (2020). Exploring Corporate Strategy (12th ed.). Pearson. [Google Scholar] [Crossref]

27. Johnson, P., & Lee, S. (2026). Global M&A Performance: A 40-Year Analysis of 40,000 Acquisitions. Strategic Management Journal, 47(1), 1-25. [Google Scholar] [Crossref]

28. Kalu, N., & Nwosu, C. (2025). Income Diversification and Resilience of Sub-Saharan African Banks during COVID-19. African Journal of Banking and Finance, 11(1), 33-50. [Google Scholar] [Crossref]

29. Kaya, H., & Demir, S. (2026). Digital Transformation and Financial Outcomes in Turkish Banking Sector. Journal of Financial Services Research, 49(3), 201-220. [Google Scholar] [Crossref]

30. Khan, M. A., & Ahmed, H. (2019). Strategic management and financial performance: A case study of commercial banks in Pakistan. International Journal of Economics and Financial Issues, 9(2), 89-95. [Google Scholar] [Crossref]

31. Khan, S., Metwally, M., & Al-Hajjar, B. (2017). Board expertise and strategic change in Saudi Arabian banks. Journal of Banking Regulation, 18(3), 211-225. https://doi.org/10.1057/s41261-017-0037-1. [Google Scholar] [Crossref]

32. Kiel, G., & Nicholson, G. (2003). Board composition and corporate performance: How the Australian experience informs contrasting theories of corporate governance. Corporate Governance: An International Review, 11(3), 189-205. https://doi.org/10.1111/1467-8683.00318. [Google Scholar] [Crossref]

33. Laeven, L., & Valencia, F. (2018). Systemic banking crises revisited. International Monetary Fund Working Paper, WP/18/206. [Google Scholar] [Crossref]

34. Li, H., & Tang, G. (2018). Corporate governance and strategic change: The mediating role of managerial discretion. Management Decision, 56(5), 1031-1049. https://doi.org/10.1108/MD-09-2017-0899. [Google Scholar] [Crossref]

35. Li, X., Zhang, Y., & Chen, L. (2024). Effects of Digital Transformation on Chinese A-Share Companies: A Lagged Response Study. Asian Journal of Business and Accounting, 17(4), 78-95. [Google Scholar] [Crossref]

36. Mensah, K., & Owusu, A. (2018). Long-Term Effects of Mergers and Acquisitions on Ecobank Ghana’s Financial Performance. West African Journal of Banking and Finance, 6(2), 112-130. [Google Scholar] [Crossref]

37. Mwangi, D., & Waweru, K. (Year). Investment Portfolio Diversification and Bank Financial Performance: Evidence from Kenya. Kenya Journal of Finance and Investment, 12(1), 45-60. [Google Scholar] [Crossref]

38. Mwangi, J., Wambua, F., & Oduor, P. (2024). Sector Consolidation and Market Share: Evidence from African Financial Services. Journal of African Business, 18(2), 95-113. [Google Scholar] [Crossref]

39. Nguyen, T., & Tran, H. (2025). Integration of Digital Transformation Strategies and Basel II Compliance in Vietnamese Banks. Vietnam Journal of Economics and Finance, 9(2), 88-102. [Google Scholar] [Crossref]

40. Njoroge, M., & Kamau, J. (2022). Corporate Restructuring and Financial Performance: Evidence from Kenyan Banks. East African Journal of Finance, 10(3), 99-115. [Google Scholar] [Crossref]

41. Ochieng, R., & Kimani, S. (2023). Mixed Financial Outcomes from Commercial Bank Mergers and Acquisitions. International Review of Financial Analysis, 56(1), 62-78. [Google Scholar] [Crossref]

42. Ojo, O., & Ojo, A. (2018). Board gender diversity and strategic change in Nigerian firms. Gender in Management, 33(6), 417-433. https://doi.org/10.1108/GM-07-2017-0076 [Google Scholar] [Crossref]

43. Ojo, T., & Balogun, A. (2025). Multi-Variant Analysis of Corporate Restructuring Effects on Nigerian Commercial Banks. Journal of African Financial Studies, 17(2), 134-153. [Google Scholar] [Crossref]

44. Park, J., & Lee, S. (2019). Audit committees and strategic change: Evidence from Korea. Asian Review of Accounting, 27(1), 20-39. https://doi.org/10.1108/ARA-09-2018-0127 [Google Scholar] [Crossref]

45. Pham, Q., & Le, D. (2023). Short-Term Financial Effects of Digital Transformation: Evidence from Vietnamese Banks Using GMM. Journal of Emerging Markets Finance, 21(3), 134-149. [Google Scholar] [Crossref]

46. Schmidt, H., & Braun, M. (2024). Asset Diversification and Risk-Taking in the German Banking Industry. European Journal of Finance, 29(2), 110-127. [Google Scholar] [Crossref]

47. Sharma, R., & Iyer, P. (2024). Impact of Digital Transformation on Financial Performance: Evidence from India’s Publicly Listed Firms. International Journal of Productivity and Performance Management, 73(1), 58-74. [Google Scholar] [Crossref]

48. Sharma, S., & Iselin, E. (2020). Board structure and strategic change: Evidence from manufacturing firms. Corporate Governance: The International Journal of Business in Society, 20(4), 681-700. https://doi.org/10.1108/CG-07-2019-0251 [Google Scholar] [Crossref]

49. Singh, R., & Zafar, S. (2021). Corporate governance mechanisms and strategic change: Longitudinal evidence from India. Journal of Management & Governance, 25(2), 457-479. https://doi.org/10.1007/s10997-020-09532-0 [Google Scholar] [Crossref]

50. Smith, J., & Thompson, R. (2026). Business Line Diversification and Firm Performance: An Empirical Study. Journal of Corporate Finance, 35(3), 150-169. [Google Scholar] [Crossref]

51. Westphal, J. D., & Fredrickson, J. W. (2001). Who directs strategic change? Director experience, the selection of new CEOs, and change in corporate strategy. Strategic Management Journal, 22(12), 1113-1137. https://doi.org/10.1002/smj.206 [Google Scholar] [Crossref]

52. Westphal, J. D., & Zajac, E. J. (1995). Who shall govern? CEO/board power, demographic similarity, and new director selection. Administrative Science Quarterly, 40(1), 60-83. https://doi.org/10.2307/2393783 [Google Scholar] [Crossref]

53. Zahra, S. A., & Pearce, J. A. (1989). Boards of directors and corporate financial performance: A review and integrative model. Journal of Management, 15(2), 291-334. https://doi.org/10.1177/014920638901500208 [Google Scholar] [Crossref]

• The Correlation of Marketing Strategies and Financial Performance of Motor Parts Businesses in the City of Mati
• The Role of Blockchain-Based Smart Contracts in Enhancing Financial Transparency and Efficiency in the Emerging Market
• Exploring Intention among Universiti Teknologi Mara Terengganu Community to Donate into Education Waqf Fund
• Utilizing AHP Method to Rank Preference of Waqf Fund Usage for UiTM Terengganu, Malaysia
• The Influence of Portfolio Diversification on Financial Performance: Evidence from Listed Banks on the Ghana Stock Exchange