Do IT investments add value to firms? Famously, Carr (2003) argued “No”. Increasingly, the evidence is a resounding “Yes” (Dehning et al. 2003). However, under what conditions do these investments make an impact? This underpins the research aim of this paper to improve the understanding of how IT investment announcements affect the value of firms. To achieve this aim, this study will answer this research question “How do IT investment announcements regarding Y2K compliance affect the market value of companies?” The study will examine and extend current knowledge by proposing an enriched research model. It will then use the event study methodology to test this model assuming a semi-strong market hypothesis. Through the observed abnormal returns, causal relationships will be able to be seen between the variables and their respective market reaction. This will provide conclusions on the variables that influence investor interpretation of a signal, and therefore market reaction.
Lo, Moses and Winchester, Donald, "The Impact of IT Investment Announcements about Y2K Compliance on the Firm’s Market Value" (2010). ICIS 2010 Proceedings. 211.