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Investigating the influence of information technology capability on risk and returns: a firm-level empirical analysis

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  • Bharat Arora
  • Zillur Rahman

Abstract

Although considerable research has been done to examine the impact of IT on productivity and profitability of firms, the influence of IT on firm risk has not received the research attention that it deserves, and is still an under-researched area. The purpose of this study is to assess the influence of IT capability on risk-return relationship of firms that operate in India. Comparing the financial risk and returns of 87 firms, from 15 different industries, over a period of six years, we found a positive and significant association between superior IT capability and firm risk. This research also suggests that superior IT capability is not associated with improved financial performance of firms. A surprising finding of this study is that even post-implementation, IT initiatives increase firm risk. Prior studies carried out in the context of developed nations have indicated that post-implementation, IT initiatives reduce firm risk. This difference (of post-implementation risk of IT initiatives) between developed economies and fast growing emerging economies like India provides a fertile ground for future research.

Suggested Citation

  • Bharat Arora & Zillur Rahman, 2017. "Investigating the influence of information technology capability on risk and returns: a firm-level empirical analysis," International Journal of Business Excellence, Inderscience Enterprises Ltd, vol. 13(1), pages 112-126.
    • Handle: RePEc:ids:ijbexc:v:13:y:2017:i:1:p:112-126
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