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An empirical analysis of the relationship between information systems and organizational performance in the commercial banking industry

Karen Diane Loch, University of Nebraska - Lincoln

Abstract

The commercial banking industry leads all other industries in investment in information systems. The underlying force behind this massive spending is the intuitive belief that information technology enables the bank to be more competitive and improve its bottom line. However the relationship between information systems and organizational performance has not been empirically investigated to substantiate these intuitive beliefs. This empirical study examines the information system and its organizational context in relation to organizational performance. Organizational performance is defined by three dimensions of financial performance variables including return data and the noninterest and interest sides of the bank. The variables were operationalized based on a proposed framework for MIS research. Factor analysis was performed for both the independent and dependent variables. Factor scores were then used for the multiple regression models reflecting the three dimensions of financial performance. Limited statistical significance was found. A positive significant relationship was found between operational optimization and the independent factor representing the interrelationship of the organization and the management of the information system. Of practical significance was the finding that the independent factor responsiveness correlated negatively with profitability at a significant level. The findings of this study are of import to both the practitioner and the researcher. For the practitioner, they suggest that (1) the management of the relationship between the information system function and the organization is more important than the physical configuration of the system itself and (2) the responsiveness of the information system to meeting management and organizational-wide needs merits closer monitoring. For the researcher, this empirical study represents a step forward in examining the relationship between information systems and organizational performance. Operationalization of variables suggested by past framework studies were tested. The lack of significance for the total model indicates a need for fine-tuning of the measurement instruments as well as a critical assessment of the model in building and testing future models.

Subject Area

Information Systems|Banking

Recommended Citation

Loch, Karen Diane, "An empirical analysis of the relationship between information systems and organizational performance in the commercial banking industry" (1988). ETD collection for University of Nebraska-Lincoln. AAI8818638.
https://digitalcommons.unl.edu/dissertations/AAI8818638

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