Does information technology provide banks with profit?

While many studies have affirmed the contributions of information technology (IT) to business value, people are not convinced. So far IT in the service industry has not yet been seen to be more productive. The data in most previous studies either focus on specific industries or exclude financial industry data. As such, the need to do an analysis on IT productivity in the service industry is imminent. We chose 12 banks covering 9 years for our analysis. To eliminate possible estimation errors, we applied an analysis for panel data--a random effect model. We found IT investment demonstrated the highest marginal product among the input factors we chose.

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