Information technology investments and firm performance: The interacting effect of it governance

In recent times, investment in information technology (IT) has become indispensable in any company. Proper management of IT investment may create value for the company and improve its performance. However, companies face problems in choosing the right IT investment decision that improves companies' performance. Subsequently, the objective of the study was to investigate the effects of IT investment on companies’ performance in Malaysia. In addition, it examined further whether this effect was interacted by IT governance mechanisms such as CEO career horizon, CEO gender, CEO IT background, board IT training, government-linked companies and foreign-owned firms. This study employed the dynamic panel estimation technique, the Generalized Method of Moments (GMM), that considered the endogeneity nature of the performance model. The GMM analysis was based on data from 231 publicly listed companies in Bursa Malaysia between 2010 and 2019. It revealed a positive and non-significant association between IT investment and firm performance. Furthermore, the IT governance mechanisms (i.e., CEO career horizon, CEO gender, CEO IT background, board IT training, government-linked companies, and foreign-owned firms) were found to significantly enhance the positive association between IT investment and firm performance. Thus, the findings of this study have both theoretical and practical implications. The results provided empirical evidence on the direct impact of IT investment on firm performance. In addition, the indirect impact may serve as an indication for firms to understand IT governance mechanisms and its interaction effects between IT investment and firm performance. These would enhance the awareness of professionals, the board of directors and management in the critical role of IT governance practices and in ascertaining that firm’s IT investment is properly governed

Does institutional investor influence information technology investment decisions and corporate performance?

AbstractThis paper examines the role of institutional investors foreign-owned firms and government-linked companies, in improving firm performance through the channel of IT investment decision. The data sample comprises information collected from the annual reports of 231 companies listed on Bursa Malaysia, spanning the years 2010 to 2019. This study concludes, on the basis of the Generalized Method of Moments (GMM) dynamic model, which mitigates the endogeneity issue linked to the equity multiple value model, that institutional ownership moderates the relationship between IT investment and firm performance in a positive direction. The results of the study shed light on the capacity of institutional investors to allay apprehensions regarding agency problems that arise from the rent-seeking conduct of managers. The implications of this finding are both theoretical and practical, given that IT expenditures continue to constitute a substantial proportion of the capital budgets of organisations. However, several studies indicate that there is no direct relationship between firm IT investment levels and firm performance. This study contributes to the body of knowledge by examining the influence of institutional investors on IT investment decisions. It does so by integrating agency theory, which explains performance shortfalls, and corporate governance, which oversees and controls managers’ inappropriate investment choices, thereby illuminating the antecedents of IT investment decisions. The present investigation would furnish significant insights for stakeholders, investors, and the general public, thereby augmenting their understanding of the pivotal significance of institutional ownership and guaranteeing that investments in IT are adequately regulated