The Downside Risk Implications of Investments in Information Technology

Determining whether investments in information technology (IT) have beneficial effects on an organization is an area of research that continues to interest academics, managers, and investors. Our study contributes to this line of research by examining the effect of investments in IT on the risk profiles of a sample of companies. Additionally, we examine whether different types of IT investments may have different impacts on firm risk. We use the downside conceptualization of risk, that some have argued, most appropriately represents the risk taking attitudes of investors and managers. The results of this study suggest that IT investments do have an impact on organizational downside risk. A number of studies have examined whether investments in IT have a positive effect on some measure of earnings or other form of financial return. Results from the studies have been mixed. The findings of our study may offer an alternative perspective that captures the benefits of IT investments where no apparent incremental financial results are evident.