IMPACT OF INFORMATION TECHNOLOGIES’ INVESTMENTS ON THE PROFITABILITY OF TUNISIAN BANKS: PANEL DATA ANALYSIS
Keywords:
Information Technology, Profitability, Banks, Statistic Panel, Dynamic Panel.
Abstract
This study examines the relationship between Information Technology investment and the profitability of Tunisian banks, via static and dynamic panel regression models. Our study focused on 15 Tunisian banks for 19 years (2001-2019). To assess the profitability of these banks, three measures were used: two traditional accounting ratios and net interest margin. Our research has shown the importance of the role played by IT in Tunisian banks since IT investments improve their profitability. This finding contradicts the “Productivity Paradox” that high IT investments are not associated with better performance. Indeed, Tunisian banks are acting on their size to boost their performance, and the more the banks take the risk by granting more loans, the more profitable they are by increasing their Return on Assets. Finally, public banks are more profitable than private banks when considering their net interest margin.
JEL Classification Codes: B21, C58, G21, G32, O32.
References
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Alpar, P., & Kim, M. (1990). A microeconomic approach to the measurement of information technology value. Journal of Management, Information Systems, 2(7), 55-69.
Aly, H., Grabowsky, R., Pasurka, C., & Rangan, N. (1990).Technical, Scale and Allocative Efficiencies in U.S. Banking: An Empirical Investigation. The Review of Economics and Statistics, 72, 211-218.
Anderson, T.W., & Hsiao, C. (1981). Estimation of Dynamic Models with Error Components. Journal of American Association, 67(375), 598-606.
Anderson, T.W., & Hsiao, C. (1982). Formulation and Estimation of Dynamic Models Using Panel Data. Journal of Econometrics, 18, 47-82.
Anwar, J., Seth, H., Vaish, A. K., & Rao, N. V. M. (2020). Revisiting the Efficiency of Indian Banking Sector: An Analysis of Comparative Models Through Data Envelopment Analysis. Indian Journal of Finance and Banking, 4(1), 92-108.
Arellano, M., & Bond, S. (1991). Some tests of specification for panel data: Monte Carlo evidence and an application to employment equations. The Review of Economic Studies, 58(2), 277-297.
Bakkeri, A., & Ali, A. B. (2020). Profitability of Islamic Banks: A Panel Data Analysis. Indian Journal of Finance and Banking, 4(3), 26-38.
Bakos, Y. (1993). IT, incentives and the optima number of suppliers. Journal of Management, Information Systems, 10, 37-53.
Barua, A., Kriebel, C., & Mukhopadhyay, T. (1991). Information technologies and business value: An analytic and empirical investigation. Information Systems Research, 6(1).
Beccalli, E. (2007). Does IT investments improve bank performance? Evidence from Europe. Journal of Banking and Finance, 31, 2205-2230.
Ben Naceur, S. (2003).The determinants of the Tunisian banking industry profitability: Panel evidence 1980-2000”. Economic Research Forum.
Berger, A. N., Hancock, D., & Humphrey, D. B. (1993). Bank efficiency derived from the profit function. Journal of Banking and Finance, 17, 317-347.
Berndt, E. (1991).The practice of econometrics: classic and contemporary. Addison Wesley: Reading, MA.
Bourke, P. (1989). Concentration and other determinants of bank profitability in Europe, North America and Australia. Journal of Banking and Finance, 13(1), 65-79.
Brynjolfsson, E. (2001). High-technology industries and market structure: Commentary. Federal Reserve Bank of Kansas City, 103-110.
Brynjolfsson, E., & Hitt, L. (1996). Paradox lost? Firm-level evidence of high returns transformation systems spending. Management Science, 42(4), 541-558.
Chaffai, M. E. (1997). Estimation of efficiency frontiers: An overview of recent developments in the literature. Development Economics Review, 3, 33-67.
Chaffai, M. E., & Dietsch, M. (1998). How to increase the performance of Tunisian commercial banks: A question of organizational or size?. Finance and Development in Maghreb, 24, 79-89.
Chen, Y., & Zhu, J. (2004). Measuring Information Technology’s indirect impact on firm performance. Information Technology and Management, 5, 9-22.
Chowdhary, R. (2017). Information Technology and its Impact on Development of Indian Banking System. Journal of Bank Management & Financial Strategies, 1(2), 9-17.
Cook, W. D., Hababou, M., & Roberts, G. S. (2000). The effects of financial liberalization on the Tunisian banking industry: A non-parametric approach. Revue of Industrial Economy, 29, 22-45.
Dos Santos, B., Peffers, G., & Mauer, D. (1993). The impact of information technology investment announcements on the market value of the firm. Information Systems Research, 4, 1-23.
Entorf, H., Gollac, M., & Kramarz, F. (1999). New Technologies, Wages and Worker Selection. Journal of Labor Economics, 17(3). 464-491.
Gayathri, G., & Suvitha, K. V. (2018). Impact of Information Technology on the Profitability of Banks in India. International Journal of Pure and Applied Mathematics, 118(20), 225-232.
Hermalin, B., & Wallace, N. (1994).The Determinants of Efficiency and Solvency in Savings and Loans. Journal of Economics, 25, 361-381.
Hoque, M. A., Ahmad, A., Chowdhury, M. M., & Shahidullah, M. (2020). Impact of Monetary Policy on Bank’s Profitability: A Study on Listed Commercial Banks in Bangladesh. International Journal of Accounting & Finance Review, 5(2), 72-79.
Isik, I., & Hassan, M. K. (2002). Cost and Profit Efficiency of the Turkish Banking Industry: An Empirical Investigation. Financial Review, 37, 257-280.
Kupper, E.F. (1998). Risk Management in Banking. in: Risk and Capital Management, Proceedings of a conference on risk and capital management at H.C., Coombs Center for Financial Studies, Sydney, 25-38.
Landauer, T. (1995).The Trouble with Computers-Usefulness, Usability and Productivity. MIT Press, Cambridge.
Licht, G., & Moch, D. (1999). Innovation and information technology in services. Canadian Journal of Economics, 32(2), 48-61.
Loveman, G. (1994). An assessment of the productivity impact of information technologies. In Information Technology and the Corporation of the 1990s: Research Studies, edited by Thomas J. Allen and Michael S. Scott Morton, Oxford: Oxford University Press, 84-110.
Molyneux, P., & Thornton, J. (1992). Determinants of European Bank Profitability: A note. Journal of Banking and Finance, 16(6), 1173-1178.
Morrison, C., & Berndt, R. (1990). Assessing the productivity of information technology equipments in the US manufacturing industries. Working paper no. 3582. National Bureau of Economic Research.
Ndeffo, L.N., & Ningaye, P. (2007). Financial reforms and profitability of the banking system of the CEMAC States. African Economic Conference, 15-17. November, Addis Abeba, Ethiopia.
Oliner, S.D., & Sichel, D.E. (2000).The Resurgence of Growth in the Late 1990s: Is Information Technology the Story?. Journal of Economic Perspectives, 14(4), 3-22.
Omri, A., & Hachana, R. (2008). Investment in information technology and banking productivity: The case of Tunisian banks. 17th Association of Information and Management Conference, Nice, France.
Prasad, B., & Harker, P. T. (1997). Examining the contribution of information technology toward productivity in US retail banking. Working paper, Wharton School, University of Pennsylvania.
Singh, S., & Singh Brar, A. (2016). Information Technology in Indian Banking Sector: Some Recent Developments. International Conference on Recent innovations in Sciences, Management, Education and Technology, 4(7), 529-535
Smida, H., & Ayadi, M. (2006). Savings in banking costs : The case of Tunisian deposit banks. Euro-mediterranean Economics and Finance Review, 1(4).
Solow, R. (1987). We’d better watch out. New York Times Book Review, p. 36.
Teru, S. P., Idoku, I., & Ndeyati, J. T. (2017). A Review of the Impact of Accounting Information System for Effective Internal Control on Firm Performance. Indian Journal of Finance and Banking, 1(2), 52-59.
Thenet, G., & Guillouzo, R. (2002). The conception of technology as a black box by bank management control : the measurement of the operational performance of branches by the DEA method. Rennes Laboratory of Economics and Social Sciences, University of Haute Bretagne, Rennes 2, 1-20.
Triplett, J.E. (1997). Concepts of Capital for Production Accounts and for Wealth Accounts: The Implications for Statistical Programs. International Conference on Capital Stock Statistics, Canberra, Australia, 10-14.
Yao, J.M. (2005). Econometric analysis of the determinants of the profitability of European banks. DEA Econometrics Finance Thesis, University Pantheon ASSAS Paris 2.
Zaghla, A., & Boujelbene, Y. (2008). Explanatory factors of X-efficiency in the Tunisian Banks: A stochastic frontier approach. MPRA Munich Personal RePEc Archive, February, 1-24.
Alpar, P., & Kim, M. (1990). A microeconomic approach to the measurement of information technology value. Journal of Management, Information Systems, 2(7), 55-69.
Aly, H., Grabowsky, R., Pasurka, C., & Rangan, N. (1990).Technical, Scale and Allocative Efficiencies in U.S. Banking: An Empirical Investigation. The Review of Economics and Statistics, 72, 211-218.
Anderson, T.W., & Hsiao, C. (1981). Estimation of Dynamic Models with Error Components. Journal of American Association, 67(375), 598-606.
Anderson, T.W., & Hsiao, C. (1982). Formulation and Estimation of Dynamic Models Using Panel Data. Journal of Econometrics, 18, 47-82.
Anwar, J., Seth, H., Vaish, A. K., & Rao, N. V. M. (2020). Revisiting the Efficiency of Indian Banking Sector: An Analysis of Comparative Models Through Data Envelopment Analysis. Indian Journal of Finance and Banking, 4(1), 92-108.
Arellano, M., & Bond, S. (1991). Some tests of specification for panel data: Monte Carlo evidence and an application to employment equations. The Review of Economic Studies, 58(2), 277-297.
Bakkeri, A., & Ali, A. B. (2020). Profitability of Islamic Banks: A Panel Data Analysis. Indian Journal of Finance and Banking, 4(3), 26-38.
Bakos, Y. (1993). IT, incentives and the optima number of suppliers. Journal of Management, Information Systems, 10, 37-53.
Barua, A., Kriebel, C., & Mukhopadhyay, T. (1991). Information technologies and business value: An analytic and empirical investigation. Information Systems Research, 6(1).
Beccalli, E. (2007). Does IT investments improve bank performance? Evidence from Europe. Journal of Banking and Finance, 31, 2205-2230.
Ben Naceur, S. (2003).The determinants of the Tunisian banking industry profitability: Panel evidence 1980-2000”. Economic Research Forum.
Berger, A. N., Hancock, D., & Humphrey, D. B. (1993). Bank efficiency derived from the profit function. Journal of Banking and Finance, 17, 317-347.
Berndt, E. (1991).The practice of econometrics: classic and contemporary. Addison Wesley: Reading, MA.
Bourke, P. (1989). Concentration and other determinants of bank profitability in Europe, North America and Australia. Journal of Banking and Finance, 13(1), 65-79.
Brynjolfsson, E. (2001). High-technology industries and market structure: Commentary. Federal Reserve Bank of Kansas City, 103-110.
Brynjolfsson, E., & Hitt, L. (1996). Paradox lost? Firm-level evidence of high returns transformation systems spending. Management Science, 42(4), 541-558.
Chaffai, M. E. (1997). Estimation of efficiency frontiers: An overview of recent developments in the literature. Development Economics Review, 3, 33-67.
Chaffai, M. E., & Dietsch, M. (1998). How to increase the performance of Tunisian commercial banks: A question of organizational or size?. Finance and Development in Maghreb, 24, 79-89.
Chen, Y., & Zhu, J. (2004). Measuring Information Technology’s indirect impact on firm performance. Information Technology and Management, 5, 9-22.
Chowdhary, R. (2017). Information Technology and its Impact on Development of Indian Banking System. Journal of Bank Management & Financial Strategies, 1(2), 9-17.
Cook, W. D., Hababou, M., & Roberts, G. S. (2000). The effects of financial liberalization on the Tunisian banking industry: A non-parametric approach. Revue of Industrial Economy, 29, 22-45.
Dos Santos, B., Peffers, G., & Mauer, D. (1993). The impact of information technology investment announcements on the market value of the firm. Information Systems Research, 4, 1-23.
Entorf, H., Gollac, M., & Kramarz, F. (1999). New Technologies, Wages and Worker Selection. Journal of Labor Economics, 17(3). 464-491.
Gayathri, G., & Suvitha, K. V. (2018). Impact of Information Technology on the Profitability of Banks in India. International Journal of Pure and Applied Mathematics, 118(20), 225-232.
Hermalin, B., & Wallace, N. (1994).The Determinants of Efficiency and Solvency in Savings and Loans. Journal of Economics, 25, 361-381.
Hoque, M. A., Ahmad, A., Chowdhury, M. M., & Shahidullah, M. (2020). Impact of Monetary Policy on Bank’s Profitability: A Study on Listed Commercial Banks in Bangladesh. International Journal of Accounting & Finance Review, 5(2), 72-79.
Isik, I., & Hassan, M. K. (2002). Cost and Profit Efficiency of the Turkish Banking Industry: An Empirical Investigation. Financial Review, 37, 257-280.
Kupper, E.F. (1998). Risk Management in Banking. in: Risk and Capital Management, Proceedings of a conference on risk and capital management at H.C., Coombs Center for Financial Studies, Sydney, 25-38.
Landauer, T. (1995).The Trouble with Computers-Usefulness, Usability and Productivity. MIT Press, Cambridge.
Licht, G., & Moch, D. (1999). Innovation and information technology in services. Canadian Journal of Economics, 32(2), 48-61.
Loveman, G. (1994). An assessment of the productivity impact of information technologies. In Information Technology and the Corporation of the 1990s: Research Studies, edited by Thomas J. Allen and Michael S. Scott Morton, Oxford: Oxford University Press, 84-110.
Molyneux, P., & Thornton, J. (1992). Determinants of European Bank Profitability: A note. Journal of Banking and Finance, 16(6), 1173-1178.
Morrison, C., & Berndt, R. (1990). Assessing the productivity of information technology equipments in the US manufacturing industries. Working paper no. 3582. National Bureau of Economic Research.
Ndeffo, L.N., & Ningaye, P. (2007). Financial reforms and profitability of the banking system of the CEMAC States. African Economic Conference, 15-17. November, Addis Abeba, Ethiopia.
Oliner, S.D., & Sichel, D.E. (2000).The Resurgence of Growth in the Late 1990s: Is Information Technology the Story?. Journal of Economic Perspectives, 14(4), 3-22.
Omri, A., & Hachana, R. (2008). Investment in information technology and banking productivity: The case of Tunisian banks. 17th Association of Information and Management Conference, Nice, France.
Prasad, B., & Harker, P. T. (1997). Examining the contribution of information technology toward productivity in US retail banking. Working paper, Wharton School, University of Pennsylvania.
Singh, S., & Singh Brar, A. (2016). Information Technology in Indian Banking Sector: Some Recent Developments. International Conference on Recent innovations in Sciences, Management, Education and Technology, 4(7), 529-535
Smida, H., & Ayadi, M. (2006). Savings in banking costs : The case of Tunisian deposit banks. Euro-mediterranean Economics and Finance Review, 1(4).
Solow, R. (1987). We’d better watch out. New York Times Book Review, p. 36.
Teru, S. P., Idoku, I., & Ndeyati, J. T. (2017). A Review of the Impact of Accounting Information System for Effective Internal Control on Firm Performance. Indian Journal of Finance and Banking, 1(2), 52-59.
Thenet, G., & Guillouzo, R. (2002). The conception of technology as a black box by bank management control : the measurement of the operational performance of branches by the DEA method. Rennes Laboratory of Economics and Social Sciences, University of Haute Bretagne, Rennes 2, 1-20.
Triplett, J.E. (1997). Concepts of Capital for Production Accounts and for Wealth Accounts: The Implications for Statistical Programs. International Conference on Capital Stock Statistics, Canberra, Australia, 10-14.
Yao, J.M. (2005). Econometric analysis of the determinants of the profitability of European banks. DEA Econometrics Finance Thesis, University Pantheon ASSAS Paris 2.
Zaghla, A., & Boujelbene, Y. (2008). Explanatory factors of X-efficiency in the Tunisian Banks: A stochastic frontier approach. MPRA Munich Personal RePEc Archive, February, 1-24.
Published
2021-03-12
How to Cite
Romdhane, S. B. (2021). IMPACT OF INFORMATION TECHNOLOGIES’ INVESTMENTS ON THE PROFITABILITY OF TUNISIAN BANKS: PANEL DATA ANALYSIS. Indian Journal of Finance and Banking, 5(2), 44-61. https://doi.org/10.46281/ijfb.v5i2.1023
Section
Research Paper/Theoretical Paper/Review Paper/Short Communication Paper
Copyright (c) 2021 Syrine Ben Romdhane
This work is licensed under a Creative Commons Attribution 4.0 International License.
