IMPACT OF INVESTMENTS IN TECHNOLOGY ON THE PROFITABILITY OF THE BRAZILIAN BANKING SECTOR

Lucas Silva Barreto, Vinicius Silva Pereira, Antonio Sergio Torres Penedo

Abstract


Purpose: To analyze the relationship between investments in technology and the profitability of the five largest Brazilian banks between 2009 and 2018.

Theoretical framework: Through correlation analysis and panel data regression, the impact of technology investment on Return on Assets (ROA) was specifically assessed.

Design/methodology/approach: Despite the growth in investment in banking technology, the level of disclosure by publicly traded companies in Brazil is still limited, with few details disclosed in corporate reports about the amounts invested, of the types investments made, the expected return and the returns already obtained with previous investments. This disclosure is influenced by factors such as company size and profitability.

Findings: In the present study, a positive relationship was identified between investment in T.I and Return on Assets (ROA) of the banks analyzed and, therefore, the presence of a profitability paradox was not found.

Originality/value:  There was a positive relationship between investment in IT and performance. There was a significant positive correlation at 5% between IT investments and financial performance, given by the relationship between profit before depreciation and total sales. The regression analysis found that an increase in IT investments raised the company's financial performance (Beta = 0.204 and p <0.1). The increase in the share of IT investments in operating expenses increased the Return on Assets by 0.039 percentage points.

Research, Practical & Social implications: Gain knowledge in the management of banking organizations in order to guide in the decision-making about technological investments that should be made.


Keywords


Investment; Profitability; Information Technology; Brazilian Banking Sector

References


Alalwan, A., Dwivedi, Y., & Rana, N. (2017). Factors influencing adoption of mobile banking by Jordanian bank customers: Extending UTAUT2 with trust. International Journal Of Information Management, 37(3), 99-110. doi: 10.1016/j.ijinfomgt.2017.01.002

Alencar, D. (2014). Sistema financeiro, bancos e financiamento da economia: uma abordagem keynesiana

Anthony, S D. et al. 2018 Corporate Longevity Forecast: Creative Destruction is Accelerating. Disponível em: . Acesso em: 31 out. 2019.

Associação Brasileira das Empresas de Software (ABES). 2019. Mercado Brasileiro de Software: Panorama e Tendências. Disponível em: . Acesso em: 31 out. 2019.

Baltagi, B. 2008. Econometrics (4a ed). New York: Springer.

Banco Central do Brasil 2017. Relatório de Estabilidade Financeira: Panorama macro do setor privado. Disponível em: . Acesso em: 12 mar. 2019.

Brynjolfsson, E., & Hitt, L. (1996). Paradox Lost? Firm-Level Evidence on the Returns to Information Systems Spending. Management Science, 42(4), 541-558. doi: 10.1287/mnsc.42.4.541

Chen, S., & Lin, K. (2015). Technology choice and bank performance with government capital injection under deposit insurance fund protection. International Review Of Economics & Finance, 39, 162-174. doi: 10.1016/j.iref.2015.04.003

Damodaran , A. 2004. Finanças corporativas: teoria e prática. Porto Alegre: Bookman

Devaraj, S., & Kohli, R. (2003). Performance Impacts of Information Technology: Is Actual Usage the Missing Link?. Management Science, 49(3), 273-289. doi: 10.1287/mnsc.49.3.273.12736.

Febraban, Federação Brasileira de Bancos. 2018. Pesquisa FEBRABAN de Tecnologia Bancária 2018: Ano base 2017. Disponível em: . Acesso em: 01 nov 2019.

Feng, Z.; WU, Z (2018). Technology Investment, Firm Performance and Market Value: Evidence from Banks. In Community Banking in the 21st Century Research and Policy Conference.

Gupta, S., Raychaudhuri, A., & Haldar, S. (2018). Information technology and profitability: evidence from Indian banking sector. International Journal Of Emerging Markets, 13(5), 1070-1087. doi: 10.1108/ijoem-06-2017-0211.

Henderson, B., Kobelsky, K., Richardson, V., & Smith, R. (2010). The Relevance of Information Technology Expenditures. Journal Of Information Systems, 24(2), 39-77. doi: 10.2308/jis.2010.24.2.39

Kohli, Devaraj, & Ow. (2012). Does Information Technology Investment Influence a Firm's Market Value? A Case of Non-Publicly Traded Healthcare Firms. MIS Quarterly, 36(4), 1145. doi: 10.2307/41703502.

Laudon, K, & Laudon, J. (2010). Sistemas de informação gerenciais. – 9. ed. – São Paulo: Pearson Prentice Hall.

Longo, L., & Meirelles, F S. (2016). Impacto dos Investimentos em Tecnologia de Informação no Desempenho Financeiro das Indústrias Brasileiras. REAd. Revista Eletrônica de Administração (Porto Alegre), 22(1), 134- 165. https://dx.doi.org/10.1590/1413-2311.0142014.48853.

Malaquias, F. F. de O et al (2015). Evidenciação de investimentos em tecnologia da informação: um estudo nos relatórios das empresas de capital aberto. Contexto, Uberlândia, 1(16). doi: 10.7198/geintec.v4i5.446.

Meneses, A., Ponte, V., & Mapurunga, P. (2013). Determinantes do nível de disclosure de ativos intangíveis em empresas brasileiras. BASE - Revista De Administração E Contabilidade Da Unisinos, 10(2). doi: 10.4013/base.2013.102.04.

Menon, N., Lee, B., & Eldenburg, L. (2000). Productivity of Information Systems in the Healthcare Industry. Information Systems Research, 11(1), 83-92. doi: 10.1287/isre.11.1.83.11784.

Mithas, S., & Rust, R. (2016). How Information Technology Strategy and Investments Influence Firm Performance: Conjecture and Empirical Evidence. MIS Quarterly, 40(1), 223-245. doi: 10.25300/misq/2016/40.1.10

Mohamad, A., Zainuddin, Y., Alam, N., & Kendall, G. (2017). Does decentralized decision making increase company performance through its Information Technology infrastructure investment?. International Journal Of Accounting Information Systems, 27, 1-15. doi: 10.1016/j.accinf.2017.09.001.

Parente, S. T., and Van Horn, R. L. 2007. “The Value of Hospital Investment in Information Technology in For-Profit and Not-forProfit Hospitals,” Health Care Financing Review (28:2), 31-43. 17427843

Phan, D., Narayan, P., Rahman, R., & Hutabarat, A. (2019). Do financial technology firms influence bank performance?. Pacific-Basin Finance Journal, 101210. doi: 10.1016/j.pacfin.2019.101210

Shin, N. (2006). The impact of information technology on the financial performance of diversified firms. Decision Support Systems, 41(4), 698-707. doi: 10.1016/j.dss.2004.10.003




DOI: https://doi.org/10.24023/FutureJournal/2175-5825/2021.v13i1.482

Article Metrics

Metrics Loading ...

Metrics powered by PLOS ALM




Copyright (c) 2020 Future Studies Research Journal: Trends and Strategies

Future Stud. Res. J. e-ISSN: 2175-5825

Mailing Address: Avenida Drª Ruth Cardoso, 7221 - CEP 05425-070 - Pinheiros - São Paulo/SP - Brasil

The publications of this journal are licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.