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Management Professor Ow publishes study on information technology in healthcare in premier journal

 

July 20, 2012

In a paper forthcoming in MIS Quarterly, a leading journal of management information systems, Terence Ow examines the impact of hospitals’ investment in information technology (IT) on their market value.

In the paper titled “Does Information Technology Investment Influence a Firm’s Market Value? A Case of Non-publicly Traded Healthcare Firms,” the associate professor of management and co-authors Rajiv Kohli of the College of William and Mary and Sarv Devaraj of the University of Notre Dame, found that IT investment has a positive impact on market value.

The study aims to provide hospitals, as well as other non-publicly traded firms that lack conventional market-based measures, with insights into the impact of IT investment and a pragmatic approach to demonstrating contribution of IT to firm value, according to Ow. While traditional financial accounting measures such as return on assets and return on investments are used to inform the impact of IT investment on firm performance retrospectively, senior managers can expect a significant influence of investment in IT on prospective measures such as the firm’s market value.

“For instance, such market valuation is critical in merger and acquisition decisions, an activity that is likely to accelerate in the healthcare industry,” he says.

According to the study, “Moody’s Investor Service projects that recent changes in U.S. healthcare will require not-for-profit hospitals, most of which are also non-publicly traded firms, to make substantial IT investments to gain operational efficiencies.” The authors’ findings will arm healthcare executives with valuable information needed to make such IT investment decisions, Ow explains.

The paper has been accepted for publication and will be printed later this year.