Does long term performance improve following the appointment of a CIO?

The chief information officer (CIO) is crucial to integrating information technology into firm strategy. While there is evidence that capital markets react favorably to CIO appointments in the days surrounding the appointment announcement, this is the first study to examine the change in firm accounting performance in the years following the appointment of a new CIO. To control for exogenous factors unrelated to CIO effectiveness, the performance of appointing firms is measured relative to industry-wide average performance for firms that did not create a new or fill an existing CIO position. Using multiple accounting return measures that are responsive to changes in efficiency and effectiveness, we find an improvement in performance that is limited largely to firms appointing to newly created positions. As expected, there are significant performance increases for “first movers” who create new CIO positions early relative to their competitors; however, firms late to appoint their first CIO also obtain similar advantages. We also find that the effect on firm performance is contingent on the economic environment of the firm and that performance improvement is most pronounced for CIO appointments occurring later in calendar time, for firms operating in industries with low sales growth, and for firms in industries with highly dynamic economic environments.