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

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

Ram S. Sriram (Georgia State University, USA) and Gopal V. Krishnan (City University of Hong Kong, China)
Copyright: © 2003 |Pages: 16
DOI: 10.4018/irmj.2003010104
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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.

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