The impact of IT investment on firm performance based on MCDM techniques

In the recent past years, researchers have presented conflicting results regarding the impact of information technology investment on firm performance. Almost all studies on information technology productivity and it role for companies performance are based on data collected and meta-analysis and do not offer a methodology or prototype of analysis in any field This study presents an attempt to adopt a multi-criteria decision making approach to evaluate the non-financial performance of companies using two famous methods. Furthermore, our results try to investigate the effects of information technology investments on firms’ non-financial performance. Finding show that investment in information systems is not necessarily related to achieving a good non-financial performance at the firm level

The influence of integrated information systems on firm financial performance

This study investigates the influence of integrated information systems (IIS) features on firm financial performance, more precisely return on asset (ROA). Research results, based on data obtained from 83 firms in 2018, confirmed the positive effect between IIS analytical capabilities on ROA, while IIS scope had negative effect on ROA. Estimated regression model revealed that IIS age and IIS implementation quality did not have any effect over firm financial performance. Findings from the study indicated that firms and IIS vendors should be careful in IIS design phase, taking into account that IIS design incorporates appropriate analytical capabilities required by business processes. Also, scope of selected IIS modules should be rational in order to avoid unnecessary IIS investment costs

Unions and Productivity, Financial Performance and Investment: International Evidence

If the presence of a union in a workplace or firm raises the pay level, unless productivity rises correspondingly, financial performance is likely to be worse. If the product market is uncompetitive this might imply a simple transfer from capital to labour with no efficiency effects, but is probably more likely to lead to lower investment rates and economic senescence. Therefore the impact of unions on productivity, financial performance and investment is extremely important. This paper distils evidence on such effects from six countries: USA, Canada, UK, Germany, Japan and Australia. It is not possible to use theory to predict unambiguously any union effect on productivity because unions can both enhance and detract from the productivity performance of the workplace or firm. The evidence indicates that, in the USA, workplaces with both high performance work systems and union recognition have higher labour productivity than other workplaces. In the UK previous negative links between unions and labour productivity have been eroded by greater competition and more emphasis on 'partnership' in industrial relations but there is a lingering negative effect of multi-unionism, just as there is in Australia. In Germany the weight of the evidence suggests that the information, consultation and voice role of works councils enhances labour productivity particularly in larger firms. In Japan unions also tend to raise labour productivity via the longer job tenures in union workplaces which makes it more attractive to invest in human capital and through the unpaid personnel manager role played by full-time enterprise union officials in the workplace. Unions will reduce profits if they raise pay and/or lower productivity. The evidence is pretty clear cut: the bulk of studies show that profits or financial performance is inferior in unionised workplaces, firms and sectors than in their non-union counterparts. But the world may be changing. A recent study of small USA entrepreneurial firms found a positive association between unions and profits and in the UK the outlawing of the closed shop, coupled with a lower incidence of multi-unionism has contributed to greater union-management cooperation such that recent studies find no association between unions and profits. North American and German evidence suggests that unionisation reduces investment by around one fifth compared with the investment rate in a non-union workplace. In both Canada and the USA this effect is even felt at low levels of unionisation. The UK evidence is mixed: the most thorough study also finds that union recognition depresses investment, but this adverse effect is offset as density rises. The exception is Japan where union recognition goes hand-in-hand with greater capital intensity.unions, productivity, profits, investment

Impact of IS/IT Investments on Firm Performance: Does “Stakeholder Orientation” Matter?

This research project addresses a central question in the IS business value field: Does IS/IT investments impact positively on firm financial performance? IS/IT investments are seen has having an enormous potential impact on the competitive position of the firm, on its performance, and demand an active and motivated participation of several stakeholder groups. Actual research conducted in the Information Systems field, relating IS/IT investments with firm performance use transactions costs economics and resource-based view of the firm to try to explain and understand that relationship. However, it lacks to stress the importance of stakeholder management, as a moderator variable in that relationship. Stakeholder theory sees the firm as the hub centric to the spokes representing various stakeholders who were in essence equidistant to the firm, and survival and continuing profitability of the corporation depend upon its ability to fulfil its economic and social purpose, which is to create and distribute wealth or value sufficient to ensure that each primary stakeholder group continues as part of the corporation’s stakeholder system. Stakeholder theory in its instrumental version, argues that if a firm pays attention to the stakes of all stakeholder groups (and not just shareholders), it will obtain higher levels of financial performance. With this premise in mind, the aim of this research project is to discuss and test the use of stakeholder theory in the IS business value stream of research, in order to achieve a better understanding of the impact of IS/IT investments on firm performance (moderated by stakeholder management). To achieve the expected impact from an IS/IT investment, it is argued that firms need a strong commitment from these stakeholder groups, which lead us to the need of a “stakeholder orientation”. When firm financial performance is measured by returns on assets (ROA), returns on investments (ROI) and returns on sales (ROS), the results show that “stakeholder orientation” impact positively in the relation between IS/IT and firm performance, using a sample of Portuguese large companies

IT Investment, Risk, and Firm Performance

Evaluating the impact of Information Technology (IT) spending on firm performance has long been an issue for both managers and researchers. To date most research has focuses on the returns that IT investments can provide to firms and the results for many years showed no impact of IT investment. More recent studies have shown an abnormally positive influence. Given the large amount of IT spending and mixed results an open question is what is the impact of IT investment on firm performance? Arguments to date have posed that the reason that IT spending did not produce productivity was due to lag effects, yet has ignored why the proposed lags were decades long. Significant research outside the information systems community has shown a tradeoff between returns and risk, yet most studies to date have used incomplete measures of returns that have failed to account for risk. Bounded rationality is used in this paper to show how IT investments could reduce variability. Borrowing from financial economics I will show that ceteris paribus risk reduction provides a plausible explanation for why IT investment continued after decades of little observable impact and how this risk reduction can explain a significant portion of the abnormal returns we now see from IT investment

The Effect of Information Technology (IT) Investments on Firm-Level Performance in the Healthcare Industry

Background: The return on investment for information technology (IT) has been the subject of much debate throughout the history of management information systems research. Often referred to as the productivity paradox, increased IT investments have not been consistently associated with increased productivity. Understand individual IT factors that directly contribute to business value should provide insight into the productivity paradox. Purpose: The effects of 3 different firm-level IT characteristics on financial performance in the health care industry are studied. Specifically, the effects of IT budget, IT outsourcing, and the relative number of IT personnel on firm-level financial performance are analyzed. Methods: Regression analysis of archival survey data for 914 Integrated Healthcare Delivery Systems is performed. Results: IT budgetary expenditures and the number of IT services outsourced are associated with increases in the profitability of Integrated Healthcare Delivery Systems, whereas increases in IT personnel are not significantly associated with increased profitability. Each one tenth of a percentage increase in IT expenditures is associated with approximately $950,000 in increased profit for an average-sized Integrated Healthcare Delivery System. Implications: To increase profitability, IT administrators should increase IT budgetary expenditures along with IT outsourcing levels. IT administrators in the health care industry can use such findings during budgeting cycles to justify increased investments in IT personnel as being budget neutral while increasing organizational capacity

Efficiency of Accounting Information System and Information Security Investment Impact on Firms Performance: A Review

Accounting Information systems should be kept safe and protected at any moment because it contains a very sensitive and confidential information. It has become vital for firms to secure their information securely as a threat to information is rapidly increasing in malicious attacks on the firms’ IT infrastructure in which it could affect business continuity. Also, penalties of inadequate security could make firms suffer substantial fiscal loss. As information technology is playing a major role in our businesses and organization today, the rate of security threats also increases, firms are encouraged to invest in a comprehensive and strong IT security set- ups to protect and safeguard the accessibility, integrity, confidentiality of accounting information from vulnerable of threat because it can cause substantial financial consequences, losing of customers, and impairment of good will amongst others. Thus, the drive of this research is to evaluate the impact of firm’s investment on information security and accounting information system efficiency on the performance of firms which indicated that a good internal control ensures reliable financial report for decision making, in which the qualitative method of data collection was used which the previous literature was reviewed and other secondary data was also used for the purpose of the study. From our findings, we discovered that unceasing investments on information security procedures lessens the risk of attack from cyber threats and failure of information system.  The researchers therefore commend businesses and organizations to take a vigorous method to information security plans and control. Also, to regulate the IT menace of some security occurrences, it is essential for firms to progressively invest in diverse security technologies considering the significant information technology related and non-information technology related security investment factors, and it is vital for businesses and organizations to know the impact of information security investment on performance. Keywords: Accounting Information System, Firm performance, Investment, Security Technology. Abbreviation AIS - Accounting Information System IT - Information Technology

An analysis of corporate restructuring in the UK

This thesis examines the operating performance of a sample of UK non-financial firms that announced different forms of corporate restructuring during 1990-2000. Several issues related to restructuring and corporate governance have been examined and empirically tested around the year of restructuring. The findings of this thesis suggest that poor firm performance, high financial leverage and excessive diversification are the main determinants of corporate restructuring. Poor management, agency problems, competition and economic recession are the main causes of these problems. In addition, new evidence is provided on the role of internal and external control systems. It is apparent that these systems work together to ensure that managerial behaviour is consistent with the maximization of shareholder wealth. The findings show that following restructuring there is an improvement in operating performance, financial leverage, labour productivity and firms are more focused. This suggests that restructuring is likely to result in the rectification of inadequate governance patterns, which in turn will create a more focused diversification strategy, increase strategic control, reduce reliance on bureaucratic control through reduced corporate staff, and increase the performance of the firm and shareholder wealth. In addition, a decision to refocus on core businesses may reflect management's termination of negative NPV projects. However, this increase in efficiency is not homogenous to all firms. With reference to the market reaction to announcements of corporate restructuring, the findings show that the market reacts negatively to announcements of corporate layoffs, dividend cuts, and CEO turnover, but reacts positively to asset sales. Further analysis shows that, in general, it is difficult to generalize about whether restructuring is associated witli positive or negative stock prices. This is because restructuring is a complex and multidimensional phenomenon and involves a lot of activities, some of which are interdependent and occur in tandem (Hall, 1994; and Peel, 1995). Secondly, with information disclosure, managers face the challenge of disclosing useful information to investors and analysts that they can use to value restructuring more accurately. However, managers are often limited in what they can disclose publicly because some of the information could benefit their firm's competitors. Information problems arise when corporate managers have private information about their firm's investment opportunities (Nfyers and Nlajluf, 1984), and either cannot credibly convey that information to dispersed investors or can do so only by disclosing proprietary information to competitors (Healy and Palepu, 1995).This thesis examines the operating performance of a sample of UK non-financial firms that announced different forms of corporate restructuring during 1990-2000. Several issues related to restructuring and corporate governance have been examined and empirically tested around the year of restructuring. The findings of this thesis suggest that poor firm performance, high financial leverage and excessive diversification are the main determinants of corporate restructuring. Poor management, agency problems, competition and economic recession are the main causes of these problems. In addition, new evidence is provided on the role of internal and external control systems. It is apparent that these systems work together to ensure that managerial behaviour is consistent with the maximization of shareholder wealth. The findings show that following restructuring there is an improvement in operating performance, financial leverage, labour productivity and firms are more focused. This suggests that restructuring is likely to result in the rectification of inadequate governance patterns, which in turn will create a more focused diversification strategy, increase strategic control, reduce reliance on bureaucratic control through reduced corporate staff, and increase the performance of the firm and shareholder wealth. In addition, a decision to refocus on core businesses may reflect management's termination of negative NPV projects. However, this increase in efficiency is not homogenous to all firms. With reference to the market reaction to announcements of corporate restructuring, the findings show that the market reacts negatively to announcements of corporate layoffs, dividend cuts, and CEO turnover, but reacts positively to asset sales. Further analysis shows that, in general, it is difficult to generalize about whether restructuring is associated witli positive or negative stock prices. This is because restructuring is a complex and multidimensional phenomenon and involves a lot of activities, some of which are interdependent and occur in tandem (Hall, 1994; and Peel, 1995). Secondly, with information disclosure, managers face the challenge of disclosing useful information to investors and analysts that they can use to value restructuring more accurately. However, managers are often limited in what they can disclose publicly because some of the information could benefit their firm's competitors. Information problems arise when corporate managers have private information about their firm's investment opportunities (Nfyers and Nlajluf, 1984), and either cannot credibly convey that information to dispersed investors or can do so only by disclosing proprietary information to competitors (Healy and Palepu, 1995)

Performance in Consumer Financial Services Organizations: Framework and Results from the Pilot Study

Financial services comprise over 4 percent of the gross domestic product of the United States and employ over 5.4 million people. By offering vehicles for investment of savings, extension of credit and risk management, they fuel the modern capitalistic society. While the essential functions performed by the organizations that make up the financial services industry have remained relatively constant over the past several decades, the structure of the industry has undergone dramatic change. Liberalized domestic regulation, intensified international competition, rapid innovations in new financial instruments and the explosive growth in information technology fuel this change. With this change has come increasing pressure on managers and workers to dramatically improve productivity and financial performance. This paper summarizes the first year of a multi-year effort to understand the drivers of performance in financial services organizations. Financial services are the largest single consumer of information technology in the economy, investing $38.7 billion dollars in 1991 (National Research Council, 1994). While this investment has had a profound effect on the structure of the industry and the products it provides, its effect on financial performance of the industry remains elusive. Why this "productivity paradox" (Brynjolfsson and Hitt,1993) exists is an important part of this project. The authors describe the differences in productivity in services from manufacturing. In the service world, the consumer co-produces the product with the firm, ofte nadding labor to the creation of the service. In addition, the scope of the service enterprise typically is quite vast, with components of the service production process being both producers and deliverers of the service. In addition, the quality of the services provided is forever changing. Thus, the authors suggest that productivity gains from human resource improvements or technology investments may not show up in standard performance measures, but may rather be used to improve the quality of the service provided. What appears to be a stagnation in productivity may actually be an increase in value delivered to the customer. Delivering value to the customer may provide the institution with sales opportunities and much needed information about the institution's customer base. The pilot survey conducted by the authors examines the relationship between technological advancement and the relational part of service delivery by studying time spent with the customer in relation to technological sophistication and time spent on the entire delivery process. The authors adopt the view that processes are the central "technology" of an organization. As with any technology, the process must be maintained. After a process has reached its useful life, it should be scrapped or rebuilt. Thus, the authors suggest that researchers should take a life-cycle view of processes when undertaking efficiency studies. The authors rely heavily on a process-oriented methodology in their analysis of performance drivers in financial services. The study does not focus on traditional measures of productivity or financial performance. Rather, the authors base comparisons on intermediary measures which evaluate the drivers of performance from the perspective of all participants in the co-productive process. This pilot study starts with consumer financial services and in particular, retail banking. The authors review the relevant literature on financial services performance and then propose a conceptual framework for the study. The framework assumes that industry conditions and firm strategy are given. The authors focus is to examine the components of performance that managers can affect, given a strategy and industry operating conditions. Thus, their initial focus is guided by their desire to direct attention to issues of implementation and their effects on performance. The authors attempt to bridge the gap between traditional productivity measures and difficult-to-measure financial performance by developing a set of value creation components as an intermediary set of performance indicators. Based on pilot interviews, these indicators reflect effective performance in ways that are more meaningful than the more traditionalmeasure of productivity, as they are the goals toward which bank management strives. The key values the study attempts to measure are customer convenience, precision, efficient cost structure, adaptability and market penetration. The survey conducted by the research team benchmarks two types of management decisions that are presumed to drive these outcomes. The first set of management choices are implementation choices, human resources choices, technology implementation processes and product/servicedelivery processes. The second set of choices relates to management infrastructure, resource management processes, the information architecture of the firm, the performance management and control systems and the organizational structure of the firm. Based on interviews and the work of previous productivity studies, the research team developed a pilot survey focused on the practices of the functional areas, business lines, product groups and the retail distribution network. The pilot measured the outcomes and choices made by managers in seven large commercial banks. The pilot results will lead to a large scale survey of practices for the entire retail banking sector. Based on early pilot results, the researchers concluded that managers in consumer financial services firms typically assume that improvement in one area of performance is largely at the expense of decreased performance in other areas. The authors believe this is only partly true. Based on the pilot results, the authors believe that better management practices can move outcomes in a number of areas simultaneously. Through effective process design, use of technology and management of human resources, institutions can improve performance in multiple categories. The successful financial services organizations will be those which find processes and practices that enhance multiple measures of performance. The results of the large scale survey of practices will be available in early 1996.

Three essays on Finance and Innovation

Innovation is regarded as a driving force behind national and firm level competitive advantage, which leads to higher future earnings and positive long-term abnormal operating performance. The financial system also plays an essential role in increasing firm and economic growth. The literature supports the notion that better developed financial intermediaries and markets can enhance productivity growth and technological innovation. In this thesis, we consider both micro (firm-level) and macro (country-level) factors and discuss how they affect innovation performance from the perspective of financial literature. We specifically emphasise the influence of two factors based on the empirical research on international samples. The first is stock liquidity. We provide a deep understanding of these factors by exploring how it affects innovation outputs and what impact it has on innovation performance. We find that although stock liquidity can affect firm innovation through R&D investment, the most impact on firm innovation comes from the direct impact of stock liquidity itself. Besides, while increased stock liquidity improves a firm’s innovation performance, it mainly contributes to a firm’s efficiency in producing high-quality patents rather than more patents. The second is the pandemic shocks. We demonstrate that following a pandemic, innovation output is disrupted for approximately seven years. In addition, the main result of the effect of pandemic shocks on aggregate innovation output is driven mainly by a significant reduction in innovative activity in the Information and Communication technology sector. Overall, we show that financial systems could improve innovation performance by boosting its efficiency, such as increasing stock liquidity. It could also affect innovation activities as a channel of exogenous shocks