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Peer effects and social learning in banks’ investments in information technology

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  • Gangopadhyay, Partha
  • Nilakantan, Rahul

Abstract

Using panel data on IT investment choices and outcomes, we perform the first empirical test of the existence of peer effects and social learning in Jordanian banks’ IT investment decisions. We fit a linear in means model of social interaction and find evidence of peer effects in banks’ choice of IT investment, consistent with the presence of contextual or endogenous effects. Further, a bank’s IT investment increases significantly with other banks’ lagged IT investments, consistent with the presence of social learning. However, a bank’s IT investment does not respond to other banks’ lagged profitability, consistent with the presence of the IT productivity paradox.

Suggested Citation

  • Gangopadhyay, Partha & Nilakantan, Rahul, 2021. "Peer effects and social learning in banks’ investments in information technology," International Review of Economics & Finance, Elsevier, vol. 75(C), pages 456-463.
    • Handle: RePEc:eee:reveco:v:75:y:2021:i:c:p:456-463
    DOI: 10.1016/j.iref.2021.03.024
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    More about this item

    Keywords

    Information technology; Banks; Jordan; Social learning; Peer effects; IT productivity paradox;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology

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