Information System and Firms’ Performance: The Case of Malaysian Small Medium Enterprises

Information system has been widely used by many corporations to automate existing operations and to improved business activities efficiency. Prior researches have shown that information system adoption help increase firm’s performance and operations efficiency. In Malaysia, Small and Medium Enterprises (SMEs) has been targeted as a mechanism in generating domestic-led investment to stimulate economic development, particularly after the economic crisis that hit the country in 1997. Thus, it is crucial for SMEs to adopt information systems to enhance their business operations capabilities and efficiency. Nevertheless, SMEs limited resources to implement information systems have been one of the critical barriers that hindered the adoption of information systems. Malaysian government had allocated special grants and various initiatives to assist SMEs to assist the adoption of these information systems. Therefore, this present study is to investigate the impact of accounting information systems on firm performance of Malaysian SMEs. Panel data was used to analyse firm’s performance. Results revealed that SMEs adopting accounting information system show significant improvement in performance compared to non-adopters.