Information Technology Investment and Banks’ Stock Performance: An External Investor's Perspective

Ari Christianti

Abstract


Information Technology (IT) investment in banks could influence investor perceptions of the bank's future prospects. IT investment in banks is often associated with service innovation, operational efficiency, increased competitiveness, and expanded market share. This study aims to empirically test the effect of IT investment in banks on stock market performance using unbalanced panel data and Fixed Effect Model (FEM) analysis. Furthermore, the sample used in this study was commercial banks listed on the Indonesia Stock Exchange, with the study period 2012-2022. The results show that IT investment in banks has been proven to have a positive impact on stock market performance. Banks with higher technology involvement tend to have strong stock returns. These findings have implications for banks to invest in IT not only to improve operational efficiency and expand service access, but also as a strategy to improve market performance. Furthermore, IT investment in banks can be used as an indicator for capital market investors in assessing banks' future prospects.


Keywords


Bank, IT investment, stock return

Full Text:

PDF

References


Agarwal, S., & Zhang, J. (2020). FinTech, Lending and Payment Innovation: A Review. Asia-Pacific Journal of Financial Studies, 49(3), 353–367. https://doi.org/10.1111/ajfs.12294

Bailey, W., Huang, W., & Yang, Z. (2011). Bank loans with Chinese characteristics: Some evidence on inside debt in a state-controlled banking system. Journal of Financial and Quantitative Analysis, 46(6), 1795–1830. https://doi.org/10.1017/S0022109011000433

Barnewold, L., & Lottermoser, B. G. (2020). Identification of digital technologies and digitalisation trends in the mining industry. International Journal of Mining Science and Technology, 30(6), 747–757. https://doi.org/10.1016/j.ijmst.2020.07.003

Beccalli, E. (2007). Does IT investment improve bank performance? Evidence from Europe. Journal of Banking and Finance, 31(7), 2205–2230. https://doi.org/10.1016/j.jbankfin.2006.10.022

Cho, T. Y., & Chen, Y. S. (2021). The impact of financial technology on China’s banking industry: An application of the metafrontier cost Malmquist productivity index. North American Journal of Economics and Finance, 57. https://doi.org/10.1016/j.najef.2021.101414

Daragmeh, A., Lentner, C., & Sági, J. (2021). FinTech payments in the era of COVID-19: Factors influencing behavioral intentions of “Generation X” in Hungary to use mobile payment. Journal of Behavioral and Experimental Finance, 32. https://doi.org/10.1016/j.jbef.2021.100574

Devillard, Y., & Weill, L. (2026). When banks borrow: Stock market reactions to loan announcements by financial vs. non-financial firms. Research in International Business and Finance, 86. https://doi.org/10.1016/j.ribaf.2026.103361

Ding, N., Gu, L., & Peng, Y. (2022). Fintech, financial constraints and innovation: Evidence from China. Journal of Corporate Finance, 73. https://doi.org/10.1016/j.jcorpfin.2022.102194

Ferreira, J. J. M., Fernandes, C. I., & Ferreira, F. A. F. (2019). To be or not to be digital, that is the question: Firm innovation and performance. Journal of Business Research, 101, 583–590. https://doi.org/10.1016/j.jbusres.2018.11.013

Gârleanu, N., Kogan, L., & Panageas, S. (2012). Displacement risk and asset returns. Journal of Financial Economics, 105(3), 491–510. https://doi.org/10.1016/j.jfineco.2012.04.002

Gujarati, D. N. (2003). Basic Econometrics (4th ed.). McGraw-Hill.

Gupta, S. D., Raychaudhuri, A., & Haldar, S. K. (2018). Information technology and profitability: evidence from Indian banking sector. International Journal of Emerging Markets, 13(5), 1070–1087. https://doi.org/10.1108/IJoEM-06-2017-0211

Hirshleifer, D., Hsu, P. H., & Li, D. (2013). Innovative efficiency and stock returns. Journal of Financial Economics, 107(3), 632–654. https://doi.org/10.1016/j.jfineco.2012.09.011

Hsu, P. H. (2009). Technological innovations and aggregate risk premiums. Journal of Financial Economics, 94(2), 264–279. https://doi.org/10.1016/j.jfineco.2009.01.002

Hsu, P. H., & Huang, D. (2010). Technology prospects and the cross-section of stock returns. Journal of Empirical Finance, 17(1), 39–53. https://doi.org/10.1016/j.jempfin.2009.08.001

Kim, J. (2023). New Technologies and Stock Returns. SSRN Electronic Journal, 1–63. https://ssrn.com/abstract=4299577

Kogan, L., & Papanikolaou, D. (2012). Growth Opportunities, Technology Shocks, and Asset Prices. The Journal of Finance, 69, 675–718. https://doi.org/https://doi.org/10.1111/jofi.12136

Kou, G., Olgu Akdeniz, Ö., Dinçer, H., & Yüksel, S. (2021). Fintech investments in European banks: a hybrid IT2 fuzzy multidimensional decision-making approach. Financial Innovation, 7(1). https://doi.org/10.1186/s40854-021-00256-y

Lai, X., Yue, S., Guo, C., & Zhang, X. (2023). Does FinTech reduce corporate excess leverage? Evidence from China. Economic Analysis and Policy, 77, 281–299. https://doi.org/10.1016/j.eap.2022.11.017

Li, C., Li, Y., Xu, Y., & Sun, G. (2025). Research on the impact of financial technology on risk-taking of commercial banks. Research in International Business and Finance, 76, 102804. https://doi.org/10.1016/j.ribaf.2025.102804

Liu, J., & Li, C. (2025). Financial technology and corporate stock prices: The role of human capital investment. Finance Research Letters, 86. https://doi.org/10.1016/j.frl.2025.108686

Miao, Z., & Juanjuan, Y. (2019). Research on Financial Technology and Inclusive Finance Development. Advances in Social Science, Education and Humanities Research, 294, 66–71.

Mithas, S., Tafti, A., Bardhan, I., & Goh, J. M. (2012). Information technology and firm profitability:Mechanisms and empirical evidence. MIS Quarterly: Management Information Systems, 36(1), 205–224. https://doi.org/10.2307/41410414

Murinde, V., Rizopoulos, E., & Zachariadis, M. (2022). The impact of the FinTech revolution on the future of banking: Opportunities and risks. International Review of Financial Analysis, 81. https://doi.org/10.1016/j.irfa.2022.102103

Mustapha, S. A. (2018). E-Payment technology effect on bank performance in emerging economies-evidence from Nigeria. Journal of Open Innovation: Technology, Market, and Complexity, 4(4). https://doi.org/10.3390/joitmc4040043

Nemati, B., & Moghaddam, R. T. (2026). The Effect of Interest Rates and Inflation on Stock Returns: A Case Study of Different Industries in the Tehran Stock Exchange. American Journal Economic and Management Business, 5(1), 122–129.

Papanikolaou, D. (2011). Investment shocks and asset prices. Journal of Political Economy, 119(4), 639–685. https://doi.org/10.1086/662221

Rico Prakoso, S. W., Wijaya, R. W., & Labib Zulfiqar, F. (2024). The Influence of Bank Risk and Bank Internal Factors on Stock Prices in the Indonesian Banking Industry (Vol. 2, Number 2). https://economics.pubmedia.id/index.php/jampk

Schnorpfeil, P., Weber, M., & Hackethal, A. (2025). Inflation and Trading. Journal of Financial Economics, 173. https://doi.org/10.1016/j.jfineco.2025.104166

Scott, S. V., Van Reenen, J., & Zachariadis, M. (2017). The long-term effect of digital innovation on bank performance: An empirical study of SWIFT adoption in financial services. Research Policy, 46(5), 984–1004. https://doi.org/10.1016/j.respol.2017.03.010

Tunay, N., Yüksel, S., & Tunay, K. B. (2019). The Effects of Technology on Bank Performance in Advanced and Emerging Economies. In A volume in the Advances in Business Strategy and Competitive Advantage (ABSCA) Book Series (pp. 263–280). IGI Global. https://doi.org/10.4018/978-1-5225-7180-3.ch015

Tut, D. (2023). FinTech and the COVID-19 pandemic: Evidence from electronic payment systems. Emerging Markets Review, 54. https://doi.org/10.1016/j.ememar.2023.100999

Ullah, I.-, Jebran, K., Ur, M., & Assistant, R. (2025). Impact of FinTech on Stock Price Liquidity. International Journal of Finance & Economics, 1–33. https://doi.org/https://doi.org/10.1002/ijfe.70047.

Wang, R., Liu, J., & Luo, H. (2020). Fintech development and bank risk taking in China. European Journal of Finance, 27(4–5), 397–418. https://doi.org/10.1080/1351847X.2020.1805782

Wang, Y., Xiuping, S., & Zhang, Q. (2021). Can fintech improve the efficiency of commercial banks? —An analysis based on big data. Research in International Business and Finance, 55. https://doi.org/10.1016/j.ribaf.2020.101338

Yordanov, Y. (2020). Banking Stocks and Technological Innovation: An Event Study Analysis. Master's thesis, Excelia Group.

Zuhroh, I., & Veronika, A. (2021). Fundamental Factor Analysis On Banking Stock Price In LQ45. Jurnal Reviu Akuntansi Dan Keuangan, 11(1), 118–137. https://doi.org/10.22219/jrak.v11i1.16115




DOI: https://doi.org/10.21107/infestasi.v22i1.33925

Refbacks

  • There are currently no refbacks.


Copyright (c) 2026 Ari Christianti

Creative Commons License

This journal is licensed under a Creative Commons Attribution 4.0 International License.