Understanding IT Governance Effectiveness in Asia: An Event Study

Abstract

The study seeks to examine the impact of Information technology (IT) governance structure, process and relational mechanisms on firm performance. Using an event study, we collected a sample of 70 announcements of IT governance adoption investments. We found that most firms adopt all three types of IT governance mechanisms. IT governance structural mechanisms have a positive impact on firm’s profitability. In contrast, IT governance process and relational mechanisms have a negative association with firm performance. More interestingly, the findings provide insight for organizations that they should realize the potentially negative impact of the controls requirements of Sarbanes-Oxley Act Section 404 and IT leadership on firm performance.