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Information Systems Frontiers
Published in: Information Systems Frontiers 1/2019

02-02-2017

An examination of the long-term business value of investments in information technology

Authors: Vincent J. Shea II, Kevin E. Dow, Alain Yee-Loong Chong, Eric W. T. Ngai

Published in: Information Systems Frontiers | Issue 1/2019

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Abstract

In this paper, we examine the effects of investments in Information Technology (IT) on the long term business values of organizations. The regression discontinuity design is used in this research to examine eight hundred and ten IT investment announcements collected from the period 1982–2007. Our results found that press releases can affect the market value of a firm by possibly providing investors with a better idea of a firm’s current and future operations and strategy. On the other hand, these press releases also appear to attract more transient investors. The attraction of transient investors likely suggests the market believes the IT investing firm is serious about its potential for growth and expansion.
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Footnotes
1
We tested the robustness of the regression model (Leamer 1983; Wooldridge 2015) found in equation 2 to determine the relative stability of the parameter estimates. To do so, we included control variables as described in Table 4 in the regression specification. When different control variables were introduced to the regression model, the overall direction and magnitude of the parameter estimates were structurally similar to the regression model found in equation 2 – which indicates the regression model is not likely to have been misspecified.
 
2
Because the CAPM oversimplifies the market by comparing excess investor returns to the market using only beta, the Fama-French 3 factor model was used to control for the impact of important variables that influence the market’s movements including differences between small and large cap stocks and value and growth stocks.
 
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Metadata
Title
An examination of the long-term business value of investments in information technology
Authors
Vincent J. Shea II
Kevin E. Dow
Alain Yee-Loong Chong
Eric W. T. Ngai
Publication date
02-02-2017
Publisher
Springer US
Published in
Information Systems Frontiers / Issue 1/2019
Print ISSN: 1387-3326
Electronic ISSN: 1572-9419
DOI
https://doi.org/10.1007/s10796-017-9735-5

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