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The effects of IT expenditures on banks’ business performance: using a balanced scorecard approach

Chang‐Soo Kim (School of Business, Chung‐Ang University, KyungKi‐Do, Korea)
Lewis F. Davidson (School of Accounting, Florida International University, Miami, Florida)

Managerial Finance

ISSN: 0307-4358

Article publication date: 1 June 2004

Abstract

This study uses the balanced scorecard(BSC) framework to assess the business performance of information technology (IT) expenditures in the Korean banking industry. The relationship between IT expenditures and bank’s financial performance or market share was significantly different depending upon the level of IT. For banks that maintain high IT level, IT expenditures appear to have (1) increased labor productivity, (2) decreased payroll expenses and increased operating and total administrative expenses, (3) increased market share, and (4) increased revenue and profit. The evidence suggests two important practical implications. First, if banks effectively use IT strategy to improve competitive advantage, they are likely to reduce payroll expenses and increase market share as well as profitability. Second, this study posits that bank managers should consider using a balanced scorecard approach to measure business performance of both IT and management strategies. Thus, evidence of this study provides guidance for achieving competitive advantage in the banking industry.

Keywords

Citation

Kim, C. and Davidson, L.F. (2004), "The effects of IT expenditures on banks’ business performance: using a balanced scorecard approach", Managerial Finance, Vol. 30 No. 6, pp. 28-45. https://doi.org/10.1108/03074350410769100

Publisher

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Emerald Group Publishing Limited

Copyright © 2004, Emerald Group Publishing Limited