IDEAS home Printed from https://ideas.repec.org/a/baq/jetart/v4y2023i13p87-93.html
   My bibliography  Save this article

The influence of information technology (IT) on firm profitability and stock returns

Author

Listed:
  • Ali Hussein Hadi

    (University of Kufa)

  • Ghassan Rashad Abdulhameed

    (University of Kufa)

  • Yasir Sahib Malik

    (University of Kufa)

  • Hakeem Hammood Flayyih

    (University of Baghdad)

Abstract

This research study examines the impact of information technology on firm profitability and stock returns. Using a comprehensive dataset of firms across various industries, this research employs rigorous statistical analysis techniques to investigate the relationship between IT investments, firm profitability metrics, and stock returns. The study focuses at how IT investments affect financial performance measures including return on assets (ROA) and return on equity (ROE), with P-values of 0.34 and 0.12, respectively. Furthermore, the study investigates the influence of IT on stock returns, taking into account market capitalization, industry trends, and macroeconomic variables. This study's conclusions center on the beneficial association between IT investments and corporate profitability. The T-value for the IT investment has risen to 6.5. The analysis reveals that firms that strategically leverage IT investments tend to experience higher profitability metrics. Additionally, the research demonstrates the impact of IT on stock returns, highlighting the significance of IT as a driver of firm value and investor confidence. Moreover, this study delves into the mechanisms through which IT investments contribute to firm profitability and stock returns. It investigates the mediating role of factors such as process innovation, customer relationship management, and supply chain optimization, which facilitate the translation of IT investments into improved financial performance. The implications of this research are significant for both practitioners and policymakers. The findings provide valuable insights for firms seeking to enhance their profitability and create shareholder value through strategic IT investments. Additionally, policymakers can use these findings to formulate policies and initiatives that promote the adoption and effective utilization of IT in businesses across various sectors

Suggested Citation

  • Ali Hussein Hadi & Ghassan Rashad Abdulhameed & Yasir Sahib Malik & Hakeem Hammood Flayyih, 2023. "The influence of information technology (IT) on firm profitability and stock returns," Eastern-European Journal of Enterprise Technologies, PC TECHNOLOGY CENTER, vol. 4(13 (124)), pages 87-93, August.
    • Handle: RePEc:baq:jetart:v:4:y:2023:i:13:p:87-93
    DOI: 10.15587/1729-4061.2023.286212
    as

    Download full text from publisher

    File URL: https://journals.uran.ua/eejet/article/download/286212/280511
    Download Restriction: no
    File URL: https://libkey.io/10.15587/1729-4061.2023.286212?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Elias Hadjielias & Michael Christofi & Shlomo Tarba, 2022. "Contextualizing small business resilience during the COVID-19 pandemic: evidence from small business owner-managers," Small Business Economics, Springer, vol. 59(4), pages 1351-1380, December.
    2. Jiban Khuntia & Terence J. V. Saldanha & Sunil Mithas & V. Sambamurthy, 2018. "Information Technology and Sustainability: Evidence from an Emerging Economy," Production and Operations Management, Production and Operations Management Society, vol. 27(4), pages 756-773, April.
    3. Jose Benitez & Gautam Ray & Jörg Henseler, 2018. "Impact of Information Technology Infrastructure Flexibility on Mergers and Acquisitions," Post-Print hal-01998000, HAL.
    4. David Hirshleifer & Po-Hsuan Hsu & Dongmei Li, 2018. "Innovative Originality, Profitability, and Stock Returns," The Review of Financial Studies, Society for Financial Studies, vol. 31(7), pages 2553-2605.
    5. Chen, Yi-Chun & Hung, Mingyi & Wang, Yongxiang, 2018. "The effect of mandatory CSR disclosure on firm profitability and social externalities: Evidence from China," Journal of Accounting and Economics, Elsevier, vol. 65(1), pages 169-190.
    6. Aydiner, Arafat Salih & Tatoglu, Ekrem & Bayraktar, Erkan & Zaim, Selim, 2019. "Information system capabilities and firm performance: Opening the black box through decision-making performance and business-process performance," International Journal of Information Management, Elsevier, vol. 47(C), pages 168-182.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Jose Benitez & Laura Ruiz & Ana Castillo & Javier Llorens, 2020. "How corporate social responsibility activities influence employer reputation: The role of social media capability," Post-Print hal-02462583, HAL.
    2. Riggs, Randy & Felipe, Carmen M. & Roldán, José L. & Real, Juan C., 2024. "Information systems capabilities value creation through circular economy practices in uncertain environments: A conditional mediation model," Journal of Business Research, Elsevier, vol. 175(C).
    3. Fang, Mingyue & Nie, Huihua & Shen, Xinyi, 2023. "Can enterprise digitization improve ESG performance?," Economic Modelling, Elsevier, vol. 118(C).
    4. Erli Dan & Jianfei Shen, 2022. "Establishment of Corporate Energy Management Systems and Voluntary Carbon Information Disclosure in Chinese Listed Companies: The Moderating Role of Corporate Leaders’ Low-Carbon Awareness," Sustainability, MDPI, vol. 14(5), pages 1-28, February.
    5. Emmanuel Anyigbah & Yusheng Kong & Bless Kofi Edziah & Ahotovi Thomas Ahoto & Wilhelmina Seyome Ahiaku, 2023. "Board Characteristics and Corporate Sustainability Reporting: Evidence from Chinese Listed Companies," Sustainability, MDPI, vol. 15(4), pages 1-26, February.
    6. Shujun Chao & Shanyong Wang & Haidong Li & Shu Yang, 2023. "The power of culture: Does Confucian culture contribute to corporate environmental information disclosure?," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 30(5), pages 2435-2456, September.
    7. Hu, Juncheng, 2021. "Do facilitation payments affect earnings management? Evidence from China," Journal of Corporate Finance, Elsevier, vol. 68(C).
    8. Po-Hsuan Hsu & Dongmei Li & Qin Li & Siew Hong Teoh & Kevin Tseng, 2022. "Valuation of New Trademarks," Management Science, INFORMS, vol. 68(1), pages 257-279, January.
    9. Zhang, Ming-ang & Lu, Shuling & Zhang, Sihan & Bai, Yanfeng, 2023. "The unintended consequence of minimum wage hikes: Evidence based on firms' pollution emission," Energy Economics, Elsevier, vol. 125(C).
    10. Bedford, Anna & Ma, Le & Ma, Nelson & Vojvoda, Kristina, 2022. "Australian innovation: Patent database construction and first evidence," Pacific-Basin Finance Journal, Elsevier, vol. 73(C).
    11. Jiang, Wei & Zhang, Cheng & Si, Chengyu, 2022. "The real effect of mandatory CSR disclosure: Evidence of corporate tax avoidance," Technological Forecasting and Social Change, Elsevier, vol. 179(C).
    12. Isaac Monday Ikpor & Enrico Bracci & Clementina Iruka Kanu & Riccardo Ievoli & Benedette Okezie & Sunday Mlanga & Charles Ogbaekirigwe, 2022. "Drivers of Sustainability Accounting and Reporting in Emerging Economies: Evidence from Nigeria," Sustainability, MDPI, vol. 14(7), pages 1-19, March.
    13. Yuyuan Chang & Wen He & Jianling Wang, 2021. "Government Initiated Corporate Social Responsibility Activities: Evidence from a Poverty Alleviation Campaign in China," Journal of Business Ethics, Springer, vol. 173(4), pages 661-685, November.
    14. Monika Klimontowicz & Anna Losa-Jonczyk & Bogna Zacny, 2021. "Banks’ Energy Behavior: Impacts of the Disparity in the Quality and Quantity of the Disclosures," Energies, MDPI, vol. 14(21), pages 1-14, November.
    15. Leonardo Becchetti & Emanuele Bobbio & Federico Prizia & Lorenzo Semplici, 2022. "Going Deeper into the S of ESG: A Relational Approach to the Definition of Social Responsibility," Sustainability, MDPI, vol. 14(15), pages 1-22, August.
    16. Xu, Si & He, Xiaoyi & Xiong, Feng & Chen, Peiyao, 2024. "CEOs’ early-life famine experience and corporate donations: Evidence from the great Chinese famine," Economic Modelling, Elsevier, vol. 130(C).
    17. Pablo Pérez-Gosende & Josefa Mula & Manuel Díaz-Madroñero, 2020. "Overview of Dynamic Facility Layout Planning as a Sustainability Strategy," Sustainability, MDPI, vol. 12(19), pages 1-16, October.
    18. Ana León-Gómez & José Manuel Santos-Jaén & Daniel Ruiz-Palomo & Mercedes Palacios-Manzano, 2022. "Disentangling the impact of ICT adoption on SMEs performance: the mediating roles of corporate social responsibility and innovation," Oeconomia Copernicana, Institute of Economic Research, vol. 13(3), pages 831-866, September.
    19. Larcker, David F. & Watts, Edward M., 2020. "Where's the greenium?," Journal of Accounting and Economics, Elsevier, vol. 69(2).
    20. Tseng, Kevin, 2022. "Learning from the Joneses: Technology spillover, innovation externality, and stock returns," Journal of Accounting and Economics, Elsevier, vol. 73(2).

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:baq:jetart:v:4:y:2023:i:13:p:87-93. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Iryna Prudius (email available below). General contact details of provider: https://journals.uran.ua/eejet/issue/archive .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.