Capital Investment Decisions on IT and its Impact on Corporate Value Maximization the Case of Ethiopian Financial Institutions
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Date
2010-06
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Addis Ababa University
Abstract
This study entitled “ Capital Investment Decisions On IT And Its Impact On Corporate
Value Maximization ” has investigated the impact of IT on profitability and cost efficiency in
six private commercial banks.
The overall objectives of the study was to evaluate the general trend of using project appraisal
tools, the rationale to invest on IT and the impact of IT on profitability and cost efficiency. In
order to evaluate these objectives five years of data has been collected from six private banks.
The data has been collected from two sources: the primary data has been gathered through
questionnaire and the secondary data has been obtained from the banks’ published audited
financial statements. In order to further strengthen the findings of this study the results has been
tested by using t-test
The findings of this study has revealed that with the exception of one bank all the remaining
banks included in the survey have not used project appraisal tools to have an ex ante knowledge
of the benefits and costs of IT investments. More over the rationale behind investing on IT was
found to be strategic requirement (75%) and to be a leader in use of technology (50%)
Evaluation of IT on the profitability and cost efficiency of high IT capital banks and the
relatively low IT capital banks has been made by using key profit and cost ratios. The result of
the study and the hypothesis testing have shown that high IT capital did not result in a
significantly better profit and cost performance compared to the relatively low IT capital banks
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Maximization the case of ethiopian financial institutions