Effect of IT Investment Announcements on the Market Value of Hospitality Firms Using Event Study Methodology

Abstract

The goals of this study are to examine the impact of IT investment announcements on firms' stock prices and to test the productivity paradox of IT investment in the hospitality industry by adopting event study methodology. The cautious interpretation of the results lends support for a positive link between IT investment announcements and financial performance. Furthermore, this study's descriptive analysis indicates that the trend of abnormal returns and cumulative abnormal returns shows steady increases over the three-day event windows. This study provides the stepping-stone to solving the IT productivity paradox and offers useful information for IT investment decision making in the hospitality business.

Keywords

IT investment announcements productivity paradox financial performance stock price abnormal returns

Get full access to this article

View all access options for this article.

References

Anthony

J.H.

Choi

Grabski

(2006), ‘Market reaction to e-commerce impairments evidenced by website outages’, International Journal of Accounting Information Systems, Vol 7, No 2, pp 60–78.

Brigham

E.F.

Gapenski

L.C.

Ehrhardt

M.C.

(1999), Financial Management Theory and Practice, Dryden Press, Fort Worth, TX.

Chatterjee

Pacini

Sambamurthy

(2002), ‘The shareholder-wealth and trading-volume effects of information-technology infrastructure investments’, Journal of Management Information Systems, Vol 19, No 2, pp 7–42.

Dehning

Richardson

V.J.

Zmud

R.W.

(2003), ‘The value relevance of announcements of transformational information technology investments’, MIS Quarterly, Vol 27, No 4, pp 637–656.

Dehning

Dow

K.E.

Stratopoulos

(2004), ‘Information technology and organizational slack’, International Journal of Accounting Information Systems, Vol 5, No 1, pp 51–63.

Dos Santos

B.L.

Peffers

Mauer

D.C.

(1993), ‘The impact of information technology investment announcements on the market value of firm’, Information Systems Research, Vol 4, No 1, pp 1–23.

Ferguson

Finn

Hall

(2005), ‘Electronic commerce investments, the resource-based view of the firm, and firm market value’, International Journal of Accounting Information Systems, Vol 6, No 1, pp 5–29.

Hair

J.F.

Black

W.C.

Babin

B.J.

Anderson

R.E.

Tatham

R.L.

(2006), Multivariate Data Analysis, 6th edition, Prentice Hall, Upper Saddle River, NJ.

Ham

Kim

W.G.

Jeong

(2005), ‘Effect of information technology on performance in upscale hotels’, International Journal of Hospitality Management, Vol 24, No 2, pp 281–294.

10.

K.S.

Dow

Grover

(2001), ‘Research report: A re-examination of IT investment and the market value of the firm – an event study methodology’, Information Systems Research, Vol 12, No 1, pp 103–117.

11.

Law

Hsu

C.H.C.

(2005), ‘Customers’ perceptions on the importance of hotel website dimensions and attributes’, International Journal of Contemporary Hospitality Management, Vol 17, No 6, pp 493–503.

12.

Peterson

P. P.

(1989), ‘Event studies: A review of issues and methodology’, Quarterly Journal of Business and Economics, Vol 28, No 3, pp 36–66.