The Value Relevance of IT Investments on Firm Value in the Financial Services Sector

Authors:
Ram S. Sriram;Gopal V. Krishnan
Affiliations:
Georgia State University, USA;City University of Hong Kong, China
Venue:
Information Resources Management Journal
Year:
2003

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Abstract

Understanding and assessing the payoff from investments in IT is an important exercise for managers. A number of researchers have examined the elusive notion of firm-level information system effectiveness and the results are mixed. This study contributes to this debate by examining the association between market value of equity and IT-related investments for a sample of firms in the financial services sector. It should be noted that companies in the financial services industry are intensive users of IT and often rely upon IT as a source of competitive advantage. We find a positive association between investments in IT and market value. Overall, our findings support the notion that investors perceive investments in IT as value-relevant.