The impact of Business Intelligence systems on stock return volatility

Business Intelligence (BI) systems support decision-making and information-sharing in increasingly complex organizational environments. As investment in these systems is steadily increasing in a wide range of industries, it is important to understand their economic effect. Under BI, information can be accessed in a timelier manner, decisions become increasingly data driven, and reports become more informative. This, in turn, can lead to more consistent company behavior and performance. We therefore hypothesized that BI systems could help reduce the company's stock return volatility. To test this hypothesis, we empirically analyzed a large sample of firms that had deployed a BI system. Our results indicated a significant reduction in stock return volatility subsequent to BI deployment. The reduction in volatility is of similar magnitude whether the BI system is implemented to serve upper or middle management, or the knowledge workforce. Overall, the results suggested that BI systems reduce the financial risk of an organization.