Examining accounting and stock market measures in evaluating the impact of returns on investments in information technology on corporation performances

Due to the extraordinary role technology plays in modern business, investing in information technology (IT) and determining its benefits are the two most important decisions facing accounting and financial management executives and managers in Fortune 500 organizations. Prior studies conducted in mid-1980s and early 1990s indicated that there was zero or negative relationship between IT investments and corporate performances. Conversely, the studies conducted in the mid-1990s and 2000s concluded that the relationship between IT investments and corporate performances showed some contradictory results. This extraordinary inconsistency has long been a dilemma to accounting and financial management executives, managers, and academicians. A recent quantitative study of 245 accounting and financial management executives and managers in Fortune 500 corporations found that, as well as providing some tangible values and intangible benefits to the firms, IT investments (IT expenditure, IT strategy, IT capability and IT management) are generally positively associated with corporate performances (efficiency, effectiveness, quality, productivity, profitability, stock returns, and competitive advantage). The study specifically found that IT expenditure is positively associated with profitability, productivity, efficiency, and coordination; IT strategy is positively associated with profitability, competitive advantage, and stock returns; IT capability is positively associated with profitability and stock returns; and IT management is positively associated with profitability, efficiency, and stock returns. The study also indicated that most accounting and financial professionals and academicians utilize accounting and stock market performance measure tools in appraising return on IT investments.