Evaluation of Information Technology (It) Investments on Bank Returns: Evidence from Nigerian Banks.

Abstract

No bank can afford to ignore the need to adopt measures that will quicken the processing and transmission of business information, as well as saving time and cost, hence, the need for information technology in banking business. Notwithstanding the numerous benefits of information technology, information technology procurement requires huge investments outlay. Whether the level of investment done in IT actually brings real benefits to the banks, is still a matter of debate in academic circles. This paper therefore, evaluates the effect of information technology investment on bank returns. Our model was structured in a way that it showed the effect and the relationship between information technology expenditure and bank returns. OLS stated in a multiple form was applied to data generated from a sample of banks that survived the 2005 regulatory bank consolidation exercise in Nigeria. The analysis suggests that information technology expenditure has a negative relationship with bank profitability indicating that IT expenditures of all the studied banks do not increase bank profitability, but rather decreases it insignificantly.

Keywords: Information technology; bank returns; level of IT investment; correlation; effe