Kassa, Christian (2017) The Impact of ICT Investment on Commercial Banks’ Performance in the Ethiopian Banking Industry. Masters thesis, Addis Ababa University.
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Abstract
The market environment of the new century has undergone rapid and accelerating change, creating more and more uncertainty and complexity to the business. Companies compete in this fierce environment to achieve a sustainable competitive advantage, positioning itself strategically with the available resources and capabilities through knowledge and innovation. The use of large investments ininformation and communication technology (ICT) has been one of the solutions found by organizations to deal with these markets and create a competitive advantage in their business landscape. Yet, arguments rose in whether ICT can create a competitive advantage for business in the theme called “Productivity Paradox”.Organizations are under tremendous pressure to justify the enormous financial resources invested in ICT. The greater the competition as a result of globalization and other market factors, it becomes even more important for organizations to act in the best of their capabilities. The decision process for the acquisition of ICT assets has become less objective and transparent contrary to the statements made by the decision makers, giving rise to the paradox in the objectives achievement and consequently in obtaining benefits. The inability to realize the true value of investments in IT creates lack of alignment between the business and ICT’s strategic value. Consequently, it creates the impression that ICT technologies being seen as a cost center and not as a strategic business partner. The Ethiopian banking industry is no lessevidenced to have increasingly using ICT investments in their day to day operations. This study examined the impact of ICT investment on bank performance in Ethiopia for the period 2011- 2015 using the robust two-step system GMM on a panel data of 15 banks. ROA was taken as a proxy for Bank performance. Annual report and audit financial statement of the 15 banks over the period 2011- 2015 were used. TheResult showed that ICT investment has produced a positive return. This finding seems to negate Solow’s “Productivity Paradox”. Though the contribution of ICT investment in ROA seems positive, yet the statistical insignificancy and the small coefficient seems to have an insignificant impact on bank profitability. This insignificant impact may be due to the moderatecompetition that exists among the banks, underutilization of technology, and mismatch between organizational structure and banking technology and duplication of ICT resources in the banking industry.
| Item Type: | Thesis (Masters) |
|---|---|
| Uncontrolled Keywords: | ICT, Bank profitability, Commercial Banks, Investment, System GMM |
| Subjects: | H Social Sciences > HG Finance Q Science > QA Mathematics > QA75 Electronic computers. Computer science Q Science > QA Mathematics > QA76 Computer software Z Bibliography. Library Science. Information Resources > Z665 Library Science. Information Science |
| Divisions: | Africana |
| Depositing User: | Selom Ghislain |
| Date Deposited: | 26 Sep 2018 10:29 |
| Last Modified: | 26 Sep 2018 10:29 |
| URI: | http://thesisbank.jhia.ac.ke/id/eprint/5616 |
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