The Financial Impact of IT Governance Mechanisms' Adoption: An Empirical Analysis with Brazilian Firms

Abstract

Recently, it appears on the agenda of many organizations the concept of IT governance in order to justify and mainly optimize IT investments. Some studies have shown that companies which have good IT governance models generate superior returns on their IT investments than their competitors. However, there is a lack of scientific research confirming that effective IT governance results in better financial performance. In this paper, we verified if companies which have adopted IT governance mechanisms improve their financial performance, examining changes on performance pre and post adoption controlling for industry mean changes. We found that companies which have adopted IT governance practices improved their performance when compared to the control group, especially regarding about profitability measures. Furthermore, we found that effects of IT governance mechanisms' adoption on financial performance are stronger in the year following adoption than in the year which IT governance was adopted.