Information Technology and the Cost of Bank Loans: An Empirical Investigation

Date
2019-01-08
Authors
Han, Shu
Hasan, Shameem
Tucci, Christopher
Journal Title
Journal ISSN
Volume Title
Publisher
Abstract
In this paper, we examine the effect of IT investment on the cost of bank loans for firms, drawing upon theories of banking and risk management. On one hand, IT may be able to reduce the risk of being overtaken by competition or other adverse situations; on the other hand, the IT investment itself might be considered risky due to nature of the digital transformation. Using a sample of 261 firms from 1991-2006 and data from InformationWeek, DealScan and Compustat, we find that IT investment is associated with lower interest rates from banks. More importantly, we find the strength of this relationship is contingent upon the role of IT in the industry, the intensity of competition in the industry, and whether the firm is diversified.
Description
Keywords
Strategy, Information, Technology, Economics, and Strategy (SITES), Organizational Systems and Technology, IT business value, cost of bank loan
Citation
Rights
Access Rights
Email libraryada-l@lists.hawaii.edu if you need this content in ADA-compliant format.