The Impact Of Information Technology Investments On Managerial Decision Making: Evidence From Dividend Payout

Abstract

Investments in Information Technology (IT) are an increasing part of organizational expenditures in spite of the fact that there is little evidence in the existing literature that suggests these investments are related to the organization’s performance. The uncertainty of IT investment payoff should be reflected in other managerial decisions. This research examines Rozeff's (1982) agency cost/transaction cost tradeoff model to determine if IT investments are related to dividend payout ratios for an organization. A dividend payout model including an IT investment variable is estimated. The estimation results suggest that a significant positive relationship exists between dividend payout and a firm’s IT investments.