Information technology investment and rural bank performance in Ghana: the moderating role of ICT diffusion and financial development

Abstract

Purpose

This study sought to examine the interaction between rural bank performance, information and communication technology (ICT) investment, ICT diffusion and financial development.

Design/methodology/approach

Data were sourced from the Association of Rural Banks (ARB) Apex and World Development Indicators (WDI) for the period 2014–2020. A total of 122 rural banks were used for this study. The study adopted the two-step system generalized method of moments (SGMM) estimation technique in assessing the interactions among variables.

Findings

This study found compelling evidence to support the positive effect of ICT investment on banks’ performance (return on asset and net interest margin). Further, ICT diffusion and financial development positively influence banks’ performance. The results show a positive moderating effect exerted by ICT diffusion and financial development on the impact of bank risk (bank stability) and ICT investment on all three performance measures.

Originality/value

The study focuses on the rural banking sector in the Ghanaian economy, compared to related studies that examine the subject matter for commercial banks. The moderating effects of ICT diffusion and financial development are assessed to guide policy on rural banking development in Ghana.

Citation

Annor, L.D.J., Agyapong, E.K., Robaina, M., Vieira, E. and Anarfo, E.B. (2024), "Information technology investment and rural bank performance in Ghana: the moderating role of ICT diffusion and financial development", Journal of Economic and Administrative Sciences, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/JEAS-07-2023-0171