AAA Spark Meeting of Regions

Peer Pressure, Information Technology Adoption, and Long-term Performance

• In Event: Emerging Economy Incentives

Abstract

We investigate the motive and effects of adopting information technology (IT) in the banking industry. Using data from the world’s fourth fastest growing economy, we show that IT adoption significantly reduces current and near-term profitability. Our results are robust, addressing the omitted variable bias and the application of robust estimation techniques. We also document the existence of cross-sectional dependence of IT adoption in banking, finding a positive effect of peer pressure on a bank’s investment IT assets. We also document that the joint effect of early adopters and IT adoption significantly increases the profitability of banks. Finally, we find that IT adoption drives long-run profitability in the banking industry.

Authors

• Md Al Mamun, La Trobe University

• Mahfuja Malik, Sacred Heart University

• Md Abdul Hannan Mia, University of Dhaka