WEALTH CREATION FROM INFORMATION TECHNOLOGY INVESTMENTS USING THE EVA (R)

    Authors

    L. J. Yao; S. G. Sutton;S. H. Chan

    Abbreviated Journal Title

    J. Comput. Inf. Syst.

    Keywords

    Information technology spending; firm performance; Economic Value Added; (EVA (R)); market value added; value based management; PRODUCTIVITY PARADOX; FIRM PERFORMANCE; PROFITABILITY; METHODOLOGY; Computer Science, Information Systems

    Abstract

    EVA (R) has recently been touted by the business press, analysts and researchers as the best method for assessing firm performance. EVA (R) focuses on maximization of incremental income above capital costs while adjusting for accounting items frequently used to manage earnings. In the current study, EVA (R) is used to assess differences in firm performance as related to IT investment in order to add clarity to conflicting results in the extant research. Our study focuses on manufacturing firms during 1998-2000 when there was widespread adoption of factory automation, enterprise resource planning and advanced production scheduling systems. Consistent with several earlier studies, results in the sample firms were inconsistent when applying traditional accounting measures (i.e. IT investment was not correlated with increases in ROI and ROA but was correlated with ROE and ROS). However, a significant relationship exists between IT investment and EVA (R), indicating increased IT investment was associated with increased wealth creation.

    Journal Title

    Journal of Computer Information Systems

    Volume

    50

    Issue/Number

    2

    Publication Date

    1-1-2009

    Document Type

    Article

    Language

    English

    First Page

    42

    Last Page

    48

    WOS Identifier

    WOS:000274760600005

    ISSN

    0887-4417

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