The Impact of Information Systems Strategy on Bank Performance in Ghana

Abstract

Today’s business environment is very dynamic and undergoes rapid changes as a result of technological innovation, increased awareness and demands from customers. Information system strategy is a plan that aims to (1) identify the required IS assets, structures, monetary resources, and technologies and (2) Allocate the existing Information System assets in the most efficient way. The purpose of this study is to determine the impact of information system strategy on bank performance of six banks in the Greater Accra Region of Ghana. There are two measures of performance that relate to how efficient and profitable a business entity is and these are Return on Asset (ROA) and Return on Equity (ROE). The study adopted a cross-sectional survey design and was comfortably placed within a scientific epistemology of logical positivism. The cases or study settings investigated were local and foreign banks. This study has three categories of population; the strategic staff, the operational staff and the bank customers from the six banks all selected at their Head Offices in Greater Accra region. A proportionate sample size of 62, 348, and 1,352 were used for the strategic staff, operational staff, and bank customers respectively. Simple random sampling was used for the selection of the operation staff whilst purposive sampling was used for the selection of the bank customers. The instrument used in this study was the questionnaire. The Statistical Package for Social Sciences (SPSS) was used for the analysis of the data. A frequency, percentages, charts and Chi- square test of independence to ascertain the significance of the relationship between variables has been used to present the results of the study. Logistic regression is also used to predict the value of a dependent variable using more independent variables. The findings revealed that, the foreign banks (Bank D, Bank E, and Bank F) have invested more in IS than the local banks (Bank A, Bank B, and Bank C). All the foreign banks exhibited increasing trends in the ROA but this trend did not occur in the local banks. This is in line with the second hypothesis that statistically concluded that banks with higher levels of information systems investments have increasing operating profits than banks with low level information systems investments. The effects of IT investment on increasing profitability (ROA and ROE) for banks are significantly great. Strategy appears to have direct effect on IT and IT has direct effect on ROA. The analysis suggests that IT can play a meaningful role in the strategy-ROA relationship. Despite these caveats, the strategic context makes a significant difference in the correlations observed between IT adoption and ROA. Without strategy variable in the model, the correlations would have been underestimated.