SMART FINANCE, SMARTER DECISIONS: THE ROLE OF AI AND DIGITAL INNOVATION IN REVOLUTIONIZING FINANCIAL MANAGEMENT

Abstract

Abstract: In the era of digital transformation, organizations are increasingly relying on advanced technologies and financial competencies to improve decision-making effectiveness. This study examines the impact of AI Capability and Digital Innovation on Financial Analytics Capability and further investigates how Financial Analytics Capability influences Decision Effectiveness. Additionally, the study explores the mediating role of Financial Analytics Capability between AI Capability and Decision Effectiveness, along with the moderating role of Financial Literacy in strengthening the relationship between Financial Analytics Capability and Decision Effectiveness.

The study is based on primary data collected through a structured questionnaire from 423 respondents across different industries. The data were analyzed using SPSS, employing regression analysis, mediation, and moderation techniques to test the proposed hypotheses. The findings reveal that both AI Capability and Digital Innovation significantly enhance Financial Analytics Capability. Financial Analytics Capability is also found to have a significant positive effect on Decision Effectiveness. Moreover, it partially mediates the relationship between AI Capability and Decision Effectiveness, while Financial Literacy significantly strengthens the impact of Financial Analytics Capability on Decision Effectiveness. The study contributes to the literature on digital transformation and decision-making by integrating technological and financial dimensions into a unified framework. It also provides practical implications for organizations by highlighting the importance of investing in AI technologies, digital innovation, and financial literacy to improve data-driven decision-making outcomes.