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

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Title:Information Technology and the Cost of Bank Loans: An Empirical Investigation
Authors:Han, Shu
Hasan, Shameem
Tucci, Christopher
Keywords:Strategy, Information, Technology, Economics, and Strategy (SITES)
Organizational Systems and Technology
IT business value
cost of bank loan
Date Issued:08 Jan 2019
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.
Pages/Duration:9 pages
Rights:Attribution-NonCommercial-NoDerivatives 4.0 International
Appears in Collections: Strategy, Information, Technology, Economics, and Strategy (SITES)

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