We study banks’ market and accounting performance during Covid-19.
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Banks with high IT-adoption had milder stock price declines.
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IT-adoption is positively linked to loan growth.
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IT-investments increased banks’ resiliency to the Covid-19 shock.
Abstract
This paper examines the impact of pre-2020 information technology (IT) adoption on bank performance during the initial stages of the Covid-19 pandemic. We show that high IT adopters performed better in terms of market returns, Tobin’s q and lending. Our findings also suggest that higher pre-crisis IT investments are associated with more loans issued under the US Paycheck Protection Program, and lower rates of loan modifications due to Covid-19. This study corroborates other recent findings that technology adoption fosters banks’ resilience during crises, ultimately enhancing financial stability.
