Peer Pressure, Information Technology Adoption, and Bank Performance

Abstract

Manuscript type: Research paper Research aims: The study examines cross-sectional dependence among banks to invest in information technology-related assets. We also analyse the short- and long-term impacts of information technology (IT) adoption on banks’ profitability and the variations in effects between early and late adopters. Design/Methodology/Approach: The study uses autoregressive distributed lag (ARDL) with dynamic fixed approach, standard fixed-effect ordinary least square and random effect model with double clustering regressions. Research findings: The study finds a positive effect of peer pressure on a bank’s investment in IT assets. It also documents that IT adoption reduces short-term profitability, but the joint effect of early adoption increases both short- and long-term profitability. Theoretical contribution/Originality: The study contributes to the banking and technology adoption literature by showing the evidence on a positive and significant effect of peer pressure on IT adoption. Practitioner/Policy implications: The findings are significant for the banking sector’s policy makers in emerging economies. Research limitation: The findings may not be applicable in the context of a developed economy with a strong IT infrastructure.