The impact of adopting IT governance on financial performance: An empirical analysis among Brazilian firms

Abstract

Recently, there has been a great deal of interest on the part of many organizations in the concept of IT governance in order to justify IT investments. Some studies have shown that companies, which have good IT governance models, generate higher returns on their IT investments than their competitors. However, there is a lack of scientific research confirming that effective IT governance leads to better financial performance. In this paper, we attempt to determine whether companies that have adopted IT governance mechanisms have improved their financial performance, by measuring pre and post adoption performance indicators. We found that companies that adopted IT governance practices improved their performance when compared to the control group, particularly in relation to profitability. Furthermore, we found that the effects of adopting IT governance mechanisms on financial performance were more pronounced in the year following adoption than in the year in which they were adopted.