Corporate Governance and Returns on Information Technology Investment: Evidence from an Emerging Market
44 Pages Posted: 17 Jul 2007
Date Written: June 2007
Prior studies have reported mixed findings on the impact of corporate IT investment on firm performance. This study investigates the role of corporate governance, an important management control system, in the IT investment-firm performance relationship in the Taiwanese high-tech industries. Two specific corporate governance factors, i.e., board independence and foreign ownership, are explored across firms of different sizes and in industries whose degrees of competitiveness run a wide gamut. Our results show a positive moderating effect of board independence on the IT investment-firm performance relationship, especially when competition intensifies. Furthermore, we find that the association between foreign ownership and firm performance is negative but not significant. Yet, foreign ownership is a significant positive moderator for small firms, suggesting that foreign investors may bring IT expertise to help small firms reap the benefits of using IT.
Keywords: IT investment, Board independence, Foreign ownership, Firm performance, Firm size, Industry competitiveness
JEL Classification: G34, M41, G31
Suggested Citation: Suggested Citation