The relationship between information technology investment and financial performance of companies listed at the Nairobi Securities Exchange

Abstract

This study sought to establish the effect of information technology investment on financial performance of companies listed at the Nairobi Securities Exchange. The entire 64 firms listed at the Nairobi Securities Exchange formed the population of the study with earnings per share as a measure of financial performance. The 2010 to 2019 quantitative secondary data was extracted from the firm’s websites. Using linear regression analysis and Pearson correlation, the study found that the relationship between information technology investment and firm financial performance is positive and not statistically significant but further tests reveal that information technology investment is a direct predictor of firm financial performance. As a contribution to theory, the study provides evidence suggesting that transaction cost theory in itself is in the interest of shareholders that agency theory advocates hence the evidence that agency theory is complemented by stakeholder theory and transaction cost theory in advancing shareholders interest far from the thought that stakeholder theory and transaction cost theory come at a cost that reduces shareholder’s wealth. The study recommends the need for more research on optimal use of information technology and communication resources as opposed to embarking on more investments hence a strategically driven information technology contributions