High-Quality Information Technology and Capital Investment Decisions

55 Pages Posted: 5 Jul 2019

See all articles by John L. Abernathy

John L. Abernathy

Kennesaw State University

Brooke Beyer

Kansas State University

Jimmy Downes

University of Nebraska at Lincoln

Eric T. Rapley

Colorado State University, Fort Collins - Department of Accounting

Date Written: July 3, 2019

Abstract

We examine the effect of high-quality information technology (IT) on management’s capital investment decisions. Evaluating capital investment decisions with contemporary investment efficiency and long-term measures of investment effectiveness, we document a positive relation between high-quality IT and capital investment decision quality. In particular, we find high-quality IT is associated with more optimal levels of investment as well as fewer future fixed asset write-downs. We also disaggregate investment efficiency and find the relation with IT quality holds for investment decisions related to capital expenditures and acquisition but not research and development expenditures. Overall, our results suggest managers equipped with better internal information from higher quality IT are able to make superior capital investment decisions. Our study contributes to the literature by providing evidence of a significant determinant of capital investment decision quality and documenting a specific mechanism that mediates the indirect effect of IT quality on future performance.

Keywords: internal information quality; capital expenditure; research and development; acquisition; information technology quality

JEL Classification: D83, E22, G31, M15, M41

Suggested Citation

Abernathy, John L. and Beyer, Brooke and Downes, Jimmy and Rapley, Eric T., High-Quality Information Technology and Capital Investment Decisions (July 3, 2019). Available at SSRN: https://ssrn.com/abstract=3414390 or http://dx.doi.org/10.2139/ssrn.3414390

John L. Abernathy

Kennesaw State University ( email )

1000 Chastain Road
Kennesaw, GA 30144
United States

Brooke Beyer (Contact Author)

Kansas State University ( email )

Manhattan, KS 66506
United States
7855325916 (Phone)

Jimmy Downes

University of Nebraska at Lincoln ( email )

1400 R St
Lincoln, NE 68588
United States

Eric T. Rapley

Colorado State University, Fort Collins - Department of Accounting ( email )

257 Rockwell Hall
Fort Collins, CO 80523
United States
970.491.7481 (Phone)

Register to save articles to
your library

Register

Paper statistics

Downloads
65
Abstract Views
295
rank
348,558
PlumX Metrics