The interconnection between investment in software and financial performance - The case of Republic of Croatia

Nowadays, information technology is condition sine qua non of every successful business in information economy surroundings. The implementation of daily tasks is aggravated or impossible without use of information techologies (IT). In this sense, many questions emerge - can companies use information technology as their competitive advantage? Is IT potentially the generator of increasing the financial result of a company? Specifically, the object of consideration in this paper is software, which is indispensable in terms of giving functionality to company's assets - hardware. In terms of finance and accounting, software is considered as intangible fixed asset which will be used for period longer than one year. The era of companies mainly focused on tangible assets has passed, and that implies that the average intangible assets to total assets ratio is rapidly increasing nowadays. At the same time, there is also a growth of industries which are greatly dependent on this category of assets. Bearing in mind that software is developed by the programmers, its quality can vary significantly. When developing specialized business software, it is not only important to have skilled programmers, but also to include experts who have the knowledge of certain business processes. If we take into consideration abovementioned facts, it is evident that the quality of software is inherent to successfully established business process that could potentially lead to optimal use of resources, i.e. save time and money. Statistically, the main aim of this paper is to examine the relationship between investment in software and financial performance of a company. In other words, determine if investment in information technology is significant stimulus in terms of improving financial performance of a company. The research sample was formed using companies listed on Zagreb Stock Exchange (ZSE). The data used in the statistical analysis was gathered from the financial statements publicly available at ZSE's official website.