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

Ali Hussein Hadi, Ghassan Rashad Abdulhameed, Yasir Sahib Malik and Hakeem Hammood Flayyih ()
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Ali Hussein Hadi: University of Kufa
Ghassan Rashad Abdulhameed: University of Kufa
Yasir Sahib Malik: University of Kufa
Hakeem Hammood Flayyih: University of Baghdad

Eastern-European Journal of Enterprise Technologies, 2023, vol. 4, issue 13 (124), 87-93

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

Keywords: IT; firm profitability; stock returns; return on assets; return on equity (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:baq:jetart:v:4:y:2023:i:13:p:87-93

DOI: 10.15587/1729-4061.2023.286212

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