Does IT investment improve bank performance? Evidence from Europe
Abstract� � � This paper investigates whether investment in Information Technology (IT), hardware, software and other IT services influences the performance of banks. Using a sample of 737 European banks over the period 1993-2000 we analyse whether IT investment is reflected in improved performance (measured using both standard accounting ratios and cost and alternative product efficiency measures). Despite banks being major investors in IT we found little relationship between total IT investment and improved bank profictability or efficiency indicating the existence of a profictability paradox. However, the impact of different types of IT investment (hardware, software and services) on banks' performance is heterogeneous. Investment in IT services from external providers (consulting services, implementation services, training and education, support services) appears to have a positive influence on accounting products and product efficiency, while the acquisition of hardware and software seems to reduce banks' performance.
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Bibliographic InfoPaper provided by Macerata University, Department of Finance and Economic Sciences in its series Working Papers with number 33-2006.
Date of creation: Oct 2006
Date of revision: Dec 2009
Publication status: Published in Journal of Banking and Finance, 31 (2007) 2205â€“2230
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-11-25 (All new papers)
- NEP-BAN-2008-11-25 (Banking)
- NEP-EFF-2008-11-25 (Efficiency & Productivity)
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