The Effect of Investment in Information Technology on the Performance of Firms Listed at Palestinian Security Exchange

Transcription

1 The Effect of Investment in Information Technology on the Performance of Firms Listed at Palestinian Security Exchange ** * Naser Abdelkarim, & Said Alawneh ** * alawnehsaid@hotmailcom / / / / ROA ROS Tobin's q ROS Tobin's q ROE ROE ROA

2 Abstract This study aims at testing the effect of investment in information technology on the performance of firms listed at Palestinian Security Exchange according to accounting performance measures namely return on assets ROA, return on equity ROE, return on sales ROS, sales growth, and the market value of the firm measured by Tobin's q On the other hand, the research is an attempt to know which one of them is more influenced by the investment in information technology The sample of the study consisted of 22 Companies listed on the Palestinian Stock Exchange during the period The researcher used the multi regression in order to analyze and test the general hypothesis The study revealed that the investment in information technology has a positive effect on accounting performance measures, and the market value of the firms This effect appears after two years Due to this the study recommends that the companies must invest in the information technology and communication because it has a positive effect on the market value and the financial performance The Palestinian authority must work to liberate the technology and communication sectors in order to make it more competitive, by issuing a law to organize and this sector Nolam, 1994 Alpar & ROS ROE ROA kim, 1990

3 Brynjolfsson, 1996 & Bakos, 1991 Tobin's q Tobin's q ROA ROS ROE Tobin's q Tobin's q

4 Tobin's q Tobin's q

5 Gunasekaram et al2001 Brien, 1998 Gunasekaram et al2001 * Brown, et al, 1995 Bharadwaj, et al, 1999

6 Economic Research Institute, 2002 * Ramirez & Mevlville, 1998 Hardware

7 Mainframe Licht and Moch, 1997

8 Huang, 2007 Ren and Dewan, 2006 Thompson et al, 2000 Weills, 1992

9 Sriram and Stump, 2004 Weill, 1992

10 Kettinger et al, 1994

11 Garven & Grace, 1998 Tan, 2000

12 Gunasekaran et al, 2001 ROI Startopoulos and Dehning, 2000

13 ROI ROE ROA Rai et al, 97 ROA ROA Hardware ROE ROS ROE Tam, 1998 ROE Bharadwaj et al, 1999 Tobin's Q ROA ROA

14 Tobin's Q Tobin's Q Dehning & Startopoulos, 2002, Rai et al, 97, Tam 1998, Brynjolfsson & yang, 2000 Roach 1988 Berndt and Morrison, 1999 IT Strassmann, 1997 ROA

15 Love man, 1994 ROE Kivijarvi and Sarrinen 1995 ROA Richardson and Zmud, 2001 Tobin's Q Tobin's Q

16 Rai et al, 1995 Tam, 1998 Dahning and stratopoulos, 2002 ROA ROS ROE ROA

17 ROE ROS Tobin's Q Osei, 2004 Brynjolfssn, 2000 Baharadwaj, 1999 Tobin's Q

18 ROE ROA ROS ROA ROE ROS = Tobin's Q Tobin's Q IT

19 Tobin's Q James Tobin's Tobin's q = Q Dehning and Tobin's Q Hitt and Brynjolfsson 1995 Bharadwaj et al, 1999 Tam1998 Rai et al, 97 Startopoulos, 2002 = Q = IT IT

20 = = = 2 + Q ROS ROE = 3 + / / / /

21

22 IT ROA ROE ROS Q 1

23 ROE ROS Q IT

24 IT ROA ROE ROS Q IT * * * * ROA ROE ROS ** ** ** Q * * * ** KS

25 ks sig ks sig ks sig ks sig ks sig ks sig IT * ** ROA ROE ROS * KS ** KS

26 Time lag Time Lag Time lag Yt = + Xt + 1 Xt1+ 2 Xt2+ + Ntn Xt Yt Xt1 Xt Yt Xt2 Xt1 Xt Yt Xt3 Xt2 Xt1 Xt Yt ROA ROS ROE

27 ROA F R 2 Sig F 0422 **0012 **0036 IT F ROA R Sig ** * * * IT IT 2003 IT 2003 IT 2002 IT 2003 IT 2002 IT ** 005 *

28 R 2 ROA2003 = IT IT IT2001 F R 2 Sig

29 Sig F ** IT F ROE R sig IT ** 0005** * * ** ** * IT 2003 IT 2002 IT 2003 IT 2002 IT 2001 IT 2003 IT 2002 IT 2001 IT 2000 IT 99 IT ** 005 *

30 Rai et al, 1997 Tam 1998 Dahning and Startopoulos, 2002 ROE 2003= It It It It It It 98 Sig Sig F 0000* IT F ROS R sig IT * IT 0000* * * ** ** ** 005 IT IT IT IT IT *

31 ROS = It It It 2001 Berndt and Morrison1994 Roach 88 Weill, Rai et al, Tam99 Bharadwaj et al, 1999 IT Sig Sig R 2

32 IT Sig F 098 F 000 R sig IT IT * 000* * * * * ** IT 2003 IT 2002 IT 2003 IT 2002 IT ** 005 * = It It It 2001 ROA ROS ROE

33 Tobin's q Sig Sig Tobin's q Tobin's q Sig F F IT R 2 Q sig IT ** ** IT ** ** ** IT 2003 IT ** 005 IT 2003 IT 2002 IT 2001 *

34 Tobin's q Q= IT IT2002 IT IT IT IT

35 Weill, 1992 EPS /

36 ABC Alpar, p M kim 1990 A microeconomic Approach to the Measurement of Information Technology value Journal of Management Information System 7 2 P, 5569 Bakos, y 1991 A strategic Analysis of Electronic Marketplaces, M I S Quart 15 3 p Berndt, ER, & Morrison, CJ1994 Assessing the productivity of information technology equipment the US Manufacturing Industries National Bereav of Economic, Research working paper 3582

37 Bharadwaj, A 2000 A resourcebased Perspective on Information Technology Capability and Firm Performance An Empirical Investigations MIS, Quarterly, Bharadwaj, Anandhi, S Sunder G & Benn R Konsynski 1999 Information Technology Effects on Performance as Measured by Tobin`s q Management Science, Brien A 1999 Management information systems Fourth Edition, Irwin, Mc Graw Hill Brown, RM Gatian, AW & Hicks, J 1995 Strategic Information System and Financial Performance Journal of Management Information Systems, Brynjolfsson, E 1996 The Productivity Paradox of Information Technology Review and assessment Communications of the ACM 36\12Pp 6777 Brynjolfsson, E & Hitt, LM 1995 Information Technology as a factor of Production RMS Economist Innovation new Technology Brynjolfsson, E & S Yang 2000 Intangible Assets How the Interaction of Computers and Organizational Structure Affects Stock Market Valuations', Working paper, MIT Chatterjee, D C Pacini, & V Sambamurthy 2001 Stock market reaction to IT infrastructure investment An event study analysis In proceedings of the American Accounting Association Annual Meeting, Atlanta, GA ChinYueh Huang 2007 The effect of investment in information technology on the performance of firms in the rubber industry Journal of management 243 p Dehning, B & T Stratopulos 2002 Dupont Analysis of an I T enabled Competitive Advantage The International Journal of Accounting Information systems

38 Dewan, Sanjeev Fei Ren 2007 Risk ans Return of Information Technology Initiatives Evidence From Electronic Commerce Announcements Information Systems Research, Economic Research Institute 2002 The Effect of Information and Technology on Productivity In Search of Japan`s, New Economy In Japanese Seisakvkoka Repoto Report on policies and effects, No4 Garven, R & Grace, F 1998 The Profit Efficiency of Information Technology Investments A Comparison of Alternative Distribution Mechanisms in the US PropertyLiability Industry Presented at the American risk and Insurance association annual meeting, Boston, MA, August 120 Kirijarvi, H T Saarinen 1995 Investment in information systems and the financial performance of the firm Information and Management, Gunasekaran A Peter ED love F Rahimi, R Miele 2001A model for Investment Justification in Information Technology Projects International Journal of Information Management, Hitt, L, & E Brynojolfsson 1996 Productivity, Profit and Consumer Welfare Three Different Measures of Information Technology M I S Quarterly Kettinges, wj Grover, v Guha, s & Segars, AH 1994 Strategic Information System Revisited A study in Sustainability and Performance MIS Quarterly, Loveman GW 1994 An assessment of the productivity Impact on information technologies In TJ Allen, 8MS Morton, information techolag and corporation of the 1990s research, studies Cambridge MIT Press Licht G Moch D 1997 Innovation and Information Technology in Services Center for European economic research

39 Nolam, R 1994 Note on Estimating the Value of the IT Asset Harvard Business school Note Cambridge, MA OseiBryson KwekvMuata, Myung Ko 2004 Exploring the Relationship Between Information Technology Investment and Firm Performance Using Regression Splines Analysis Information and management, 42 Pp113 Rai, A R Patnayakuni, & N Patnayakuni 1997 Technology Investment and Business Performance Communication of the ACM Ramireze, R Mevlivlle, N 1998 Information Technology in Large Corporation Ten Years of Evaluation Center for Research on Information Technology and Organization, CRITO University of California, Irvin, 110 Ramireze, R Kraemer, KL & Lawer, E 2001 The Contribution of Information Technology Investment to Firm Performance Influence of Management Practices Working Paper Center for Research on Information Technology and Services, 2000, Board of Governors of Federal Reserve System Organization, University of California, Irvine, 128 Richardsom, VT & RWZmud 2001a The Value Relevance of Information Technology Investment Announcement Incorporating Industry Strategic it Role Working Paper University of Kansas Roach, SS 1998 Technology and Services Sector The Hidden Competitive Challenge Technological Forecasting and Social change Strassmann, P 1990 The Business Value of Computers an Executives Guide New Canaan, CT The information Economic Press Strassmann P 1997 Will Big Spending on Computers Guarantee Profitability Datamation,

40 Stratopoulos Ophanis, Bruce Dehning 2000 Does Successful Investment in Information Technology Solve the Productivity Paradox? Information and management, Srivam ven, Rodney stump 2004 Information Technology Investment in Purchasing An Empirical Investigation of Communications, Relationship and Performance out Comes Omega The International Journal of Management Science Tam, K Y 1998 The Impact of Information Technology Investment on Firm Performance and Evaluation Evidence From Newly Industrialized Economies Information system research, Tan B 2000 Strategy Type, Information Technology and Performance Management Science and Information systems proceeding of the twelfth conference Yosri, A 1992 The relationship between information technology expenditures and revenue contributing factors in large corporations Doctoral Dissertation, Walden University, 1992 Weill, P 1992 'The Relationship Between Investment In Information Technology and Firm Performance A study of the Value of the Manufacturing Sector Information System Research,