ALIGNING TECHNOLOGY, HUMAN CAPITAL, AND INSTITUTIONS: A CAPABILITY-DRIVEN MODEL OF DIGITAL FINANCIAL GOVERNANCE

Abstract

Digital transformation is reshaping the banking sector, yet its implications for financial governance remain insufficiently understood. While existing research has largely focused on technological adoption and performance outcomes, limited attention has been given to how digital transformation translates into governance capabilities, particularly in emerging economies. This study develops a capability-driven theoretical model that explains how digital transformation influences financial governance through the alignment of technology, human capital, and institutional conditions. Drawing on the Resource-Based View, Dynamic Capabilities Theory, and Institutional Theory, the study conceptualises digital transformation as both a strategic resource and a dynamic capability that requires complementary organizational and institutional support. Specifically, human resource management (HRM) is positioned as a capability-building mechanism that enables organizations to leverage digital technologies effectively, while the institutional environment is conceptualised as a contextual condition shaping governance outcomes. The model proposes that HRM mediates the relationship between digital transformation and financial governance, and that institutional factors moderate this relationship. The study advances the literature by integrating technological, organizational, and institutional perspectives, moving beyond technology-centric explanations of digital transformation. It contributes to theory by positioning HRM as a micro-foundation of digital governance capabilities and by conceptualising financial governance as a capability-driven outcome of digital transformation. The paper offers implications for both researchers and practitioners by highlighting the need to align digital investments with human capital development and supportive institutional frameworks to achieve effective financial governance.