Information & Management 57 (2020) 103248

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Information & Management

journal homepage: www.elsevier.com/locate/im

Market reaction to the announcement of an information technology T

investment: Evidence from Indonesia
Singgih Wijayana*, Didi Achjari
Department of Accounting Gadjah Mada University, Indonesia

ARTICLE INFO ABSTRACT

Keywords: This study examines the market’s reaction around and subsequent to the announcement of an Information
Event study Technology Investment (ITI). The Scholes-Williams’ and Dimson’s betas, a more accurate, and longer time-
Adjusted Beta window are employed to capture market reactions in an environment of thin trading on the Indonesian capital
Information technology investment market from 2001 to 2016. The results show that Indonesian investors need time to recognise the signals of
Market value
either an increase or decrease in value from an ITI. This study also finds that greater market reactions are
Post announcement drift
Indonesian Bank industry
characterised by firms in the banking industry, smaller sized firms, lower competitive position firms, first-time IT
adopter firms, and enterprise resource planning investment firms.

1. Introduction limited ability to recognise the impact of an ITI on a firm’s performance,

Prior studies suggest that investors react to Information Technology
Investment (ITI) announcements by publicly listed firms [1–4]. The
previous literature has also documented that ITI presents a positive
signal for potential increases in firms’ wealth [3,5–7], as shown by the
investors’ reactions to the announcements of an ITI [1,8–10].1 Never-
theless, Achjari and Wahyuningtyas [11], who examined market reac-
tions to the announcement of an ITI in Indonesia, found no immediate
reactions around the announcement of the ITI.
The theory of bounded rationality suggests that people try to make
rational decisions, but their ability to do so is often limited by in-
adequate knowledge, ability, time, and other factors (e.g. [12,13]). In
the context of asset pricing, the theoretical and empirical literature
suggests that financial markets are not always informationally efficient
and therefore investors continue to buy a security long after the initial,
rational, reactions to the information released should have ended
[14–17]. Investors’ uncertainty about fundamentals tends to increase
the stock’s volatility, suggesting that the investors’ ‘learning risk’ causes
the stock’s volatility to increase (e.g. [14,15,18]). Drawing from this
bounded rationality literature, we expect that investors have a limited
ability to process the information (an ITI announcement). They have a
leading to uncertainty about whether the ITI will positively or nega-
tively affect the firm’s asset price. Correspondingly, the result of no
market reaction is likely to be related to the precise time that the
market reacts to the ITI’s announcement. Analyses of the market’s re-
actions after the announcement of an ITI are more likely to capture the
effect of this ITI’s information on the market [19,20].2
Furthermore, the theory of contrast effects suggests that investors
often interpret information by contrasting it with what was previously
observed [21].3 The impact of an ITI on the firm’s market value can be
positive or negative, according to the type of ITI [5]. Given that the
value of an initially observed signal inversely biases the investors’
perception of the subsequent signal [21], we expect a positive or ne-
gative market reaction subsequent to an ITI announcement. Positive
stock price reactions are cancelled out by negative ones [22,23]. Cor-
respondingly, this study investigates whether the post ITI announce-
ment’s drift and positive/ negative market reactions capture the use-
fulness of ITI’s information.
This study also examines five factors that explain the variations in
the market’s reactions to ITI announcements. First, financial (banking)
firms adopt IT more aggressively than non-financial sector firms (e.g.
[5,10,24,25]). Correspondingly, ITI announcements by firms in the

⁎
Corresponding author at: Faculty of Economics and Business, Gadjah Mada University, Jalan Sosio Humaniora No.1 Bulaksumur, Yogyakarta, 55281 Indonesia.
E-mail addresses: singgihw@ugm.ac.id (S. Wijayana), didi_a@ugm.ac.id (D. Achjari).
1
The market’s reaction to ITI announcements is expected because ITI leads firms’ productivity. Prior studies find that ITI improves banks’ performance in Europe
[5] and electronic industry’s productivity [7].
2
Ferguson et al. [20] show that the difference between returns associated with innovative and non-innovative investments becomes apparent when they use longer
event windows. Bernard and Thomas [44] and Liang [48] suggest that most of the market’s reactions (drift) occur during the first 60 trading days subsequent to an
earnings announcement.
3
A contrast effect potentially influences outcomes in a broad range of important sequential decisions (e.g. [83]).

https://doi.org/10.1016/j.im.2019.103248
Received 18 March 2018; Received in revised form 9 December 2019; Accepted 11 December 2019
Available online 14 December 2019
0378-7206/ © 2019 Elsevier B.V. All rights reserved.
S. Wijayana and D. Achjari
banking industry are likely to result in a greater market reaction, re-
lative to those in other industries. Second, larger firms disclose more
items more frequently than smaller firms do; therefore, firm size is
negatively associated with the market’s reaction (e.g [26–28]). Third,
ITIs are a must for firms to allow them to maintain their competitive
advantage. Firms with a higher revenue or sales turnover will invest in
IT, leading to greater market reactions, relative to those with lower
competitive positions. Fourth, first-time IT adopter firms are responded
to by investors more than the later IT adopters, because the earliest ITI
announcement has a greater surprise effect, and thus, leads to greater
market reactions [28,29]. Lastly, an ITI in enterprise resource planning
(ERP) can increase firm efficiency and firm accessibility for all parties
[6,30]. An ITI in ERP is also fundamental in terms of providing basic
needs before a firm can invest in other types of IT effectively. Conse-
quently, an ITI in ERP is likely to be valued more by investors, relative
to other types of investment.
To investigate market reactions to ITI announcements and the fac-
tors explaining the variation in the market’s reactions, this study em-
ploys a market model with three alternative betas: 1) traditional, 2)
Scholes-Williams [31], and 3) Dimson [32]. The first one is used to
ensure that this study uses the same method employed by Achjari and
Wahyuningtyas [11], by applying it to this study’s dataset. The adjusted
betas of Scholes-Williams and Dimson are employed in the context of
the Indonesian trading capital market. Traditional cumulative ab-
normal returns (CARMm), Scholes-Williams (CARSch), and Dimson
(CARDim) are calculated using the cross-sectional average daily ab-
normal return from 1 day before and after (CAR3) and 2 days up to sixty
days after (CAR59) the ITI’s announcement. CAR3 is employed to ensure
that this study uses the same event window as Achjari and Wahyu-
ningtyas [11]. CAR59 is employed to anticipate investors’ delayed re-
sponse in recognising the impact of an ITI on a firm’s value. This study
also applies the division of positive and negative abnormal returns to
deal with write-offs that potentially lead to failing to capture the
market’s reactions to ITI announcements [22,23]. This study uses z-tests
to examine whether market reactions exist and t-tests to compare split-
samples, based on the factors that explain variations in the market’s
reactions.
This study finds no significant market reactions around ITIs an-
nouncements for all the alternative methods of calculating CAR3.
Significant market reactions subsequent to ITIs announcements are
found under CAR59Sch and CAR59Dim, supporting this study’s prediction
of detecting market reactions under longer event windows. These re-
sults also indicate that the use of an adjusted beta in CAR59Sch and
CAR59Dim captures the abnormal returns better than the use of the ad-
justed beta in the traditional market model (CAR59Mm). For the division
of positive and negative abnormal returns, the z-test results show that
positive (negative) reactions are significantly greater (smaller) than
zero at 1 % level of significance for both CAR3 and CAR59, supporting
this study’s first hypothesis. These results present a further explanation
why Achjari and Wahyuningtyas [11] found no market reaction around
ITI announcements. They might be able to capture the market’s reaction
if they divide the positive and negative abnormal returns. The results of
examining the factors influencing the variations in the market’s reac-
tion show that greater market reactions are characterised by firms in
the banking industry, smaller firms, lower competitive position firms,
first-time IT adopter firms, and ERP investment firms.
Prior studies indicate that the links between ITI and firm perfor-
mance remain inconclusive [33].4 By adding empirical evidence of an
examination of the market’s reaction both around and subsequent to an
ITI’s announcement on the Indonesian capital market, this study con-
tributes to the literature in several ways. First, the use of the Indonesian
4 6
Prior studies have also documented mixed results where both no market
reactions (e.g. [11,10]) and market reactions (e.g. [1–4]) around ITI an-
nouncements are found.
2
Information & Management 57 (2020) 103248
capital market, characterised by its thin trading, adds empirical con-
tributions beyond the previous studies that focused on a non-thin
market.5 While most prior studies use a non-adjusted beta, this study
employs Scholes-William’s and Dimson’s betas to detect abnormal re-
turns. Second, in contrast to the prior studies that focused on the
market’s reaction around an ITI announcement (e.g.
[1,11,23,24,34,35]), this study focuses on the market reactions both
around and subsequent to an ITI announcement. It presents empirical
evidence with a new perspective of a longer period event window.
Third, the use of positive and negative abnormal returns in the analyses
complement prior studies that concern the potential write-off between
positive and negative abnormal returns (e.g. [22,23]). Lastly, the use of
the market perspective captures the firms’ performance, which may not
be seen with accounting-based measures. The intangible benefits ob-
tained from ITI are captured and reflected in firms’ market values. This
study shows that the intangible benefits of market value are higher for
banking firms, smaller firms, lower competitive position firms, first-
time IT adopter firms, and ERP investment firms.
The remainder of this paper is organised as follows. Section 2 pre-
sents the theoretical background and hypotheses development. Section
3 demonstrates how the data, sample, and research methodology are
used to investigate the hypotheses. Section 4 presents the results of the
hypotheses testing. Section 5 presents the summary and conclusion.
2. Theoretical background and hypotheses development
2.1. Market reactions to ITI announcements
The theoretical background for the information content is derived
from the early seminal studies into information content [36–38]. Ball
and Brown [36] and Beaver [37] suggest that the usefulness of the
information contained in financial reports can be assessed by analysing
the changes in share prices around earnings announcements. Any
variability in the security’s price or volume, in response to new in-
formation in the financial report, is evidence that the information is
useful for investors [36,37,39,40].6 With regard to the association be-
tween capital investments and future equity returns, Xing [41], based
on an empirical investigation of a firm’s value effect through the Q
theory, suggests that firms with high book-to-market ratios will invest
less than firms with low book-to-market ratios. Similarly, from the
perspective of the catering theory, Polk and Sapienza [42] empirically
show how stock market mispricing influences an individual firm’s in-
vestment decisions. In particular, it is suggested that capital investment
is negatively correlated with future equity returns [41,42].
Wide-ranging evidence shows that the theory of bounded rationality
is important and incorporating bounded rationality in economic models
has successfully described economic behaviour [43]. It suggests that
decision makers should be viewed as boundedly rational [12,13]. In-
vestors continue to buy a security long after the first information re-
leased because the financial markets are not always informationally
efficient [14–17]. The literature of incomplete information suggests
that ‘learning risk’ is generated when investors update their beliefs
[15]. The price for the security may continue to rise as investors may
not believe that they have enough time to make decisions. Investors’
uncertainty about the fundamentals tends to increase stock volatility,
suggesting that the ‘learning risk’ causes the stock volatility to increase
[18]. On the basis of this bounded rationality, we expect that investors
have a limited ability to process the information (an ITI
5
Indonesian capital market is a thin market, and thus, the use of these ad-
justed betas increases the likelihood of capturing precise market reactions due
to ITI announcements.
Both abnormal returns and abnormal trading volumes are commonly used to
assess the information content of financial information [37,39,40]. This study
focuses on using abnormal returns.
S. Wijayana and D. Achjari Information & Management 57 (2020) 103248

announcement), and thus, it takes some time for investors to recognise ITI, there could be delays in the actual implementation, due to labour
the impact of an ITI on a firm’s value. shortages, inadequate technical skills, poor planning or technological
The prior literature shows a delayed price response to the new in- unfeasibility [3]. Following the post-earnings announcement drift lit-
formation’s release (e.g. [44]). The stock’s price does not immediately erature, which also suggests that the price response to new information
fully reflect the implications of current earnings for future earnings (e.g is delayed due to the investors’ failure to quickly assimilate the new
[36,37,45].). This post-earnings announcement drift literature suggests information (e.g [44].), it is expected that the market’s reaction to an
that the drift in the market’s reactions remains for several weeks [46], ITI will occur subsequent to its announcement. Lastly, the impact of an
or up to 13 weeks [47] or 60 days [44,48] subsequent to the earnings ITI on market value can be positive or negative, according to the type of
announcement. The delay in the price’s response to new information ITI [5]. Given that market reactions are determined using cross-sec-
may occur because investors fail to assimilate the newly available in- tional averages of daily abnormal returns, the use of positive stock price
formation (e.g [44]). This reasoning is applied to ITI announcements reactions may nullify the negative ones [22,23]. This decreases the
where the direct impact of an ITI on a firm’s value cannot be ensured by likelihood of capturing precise market reactions due to ITI announce-
traders or investors [3]. The literature suggests that an ITI leads to ei- ments. Following this positive and negative division literature, this
ther better firm performance [7,10,49], a productivity paradox7 study expects to capture market reactions to an ITI when the testing is
[50–53] or mixed results [5,54]. In the setting of an ITI announcement, based on separated positive and negative abnormal returns. Corre-
investors do not know whether the ITI will positively or negatively spondingly, the first hypothesis is presented as follows:
affect firm performance. In a financial market, the contrast effects lit-
H1. There are market reactions to the announcements of ITIs.
erature suggests investors perceive new news as more impressive if the
prior news was bad and less impressive if the prior news was good [21].
The value of a previously observed signal inversely biases the percep-
2.2. Factors explaining market reactions to ITI announcements
tion of the following signal. Consequently, a positive or negative market
reaction around the ITI’s announcement and a negative or positive
2.2.1. Industry
market reaction subsequent to the ITI’s announcement can be expected.
Prior studies have documented inconclusive results about the as-
Indeed, a number of studies have documented that an ITI has a
sociation between market reactions to ITIs in the financial and non-
positive impact on a firm’s products, services, internal processes, and
financial industries. Early studies of the market’s reaction to an ITI’s
performance [7,10,49]. For example, firms that adopt IT are likely to
announcement propose that the ITI should be more important for ser-
make gains in their cost efficiency and productivity. In the case of an ITI
vice firms than for other types of firms [10]. The stock market’s re-
in ERP, integrating the data into a central storage and application can
sponse to ITI announcements in the financial and non-financial sectors
increase a firm’s accessibility for all parties and thus increase the firm’s
is explained by innovative and non-innovative ITIs [10], the strategic
efficiency [6,30]. Quick decisions can be made by providing a financial
role of an ITI [24], contextual factors such as size, leverage, and time
analysis, on-time sale’s reporting, inventory, and production reports
period [61] and efficiency [62]. Interestingly, the type of industry is
through ERP [30]. Thus, a firm’s investment in information technology
found to be a factor that explains ITI failures, as Bharadwaj et al. [2]
may indicate an increase in the firm’s future cash flow and perfor-
found that the market penalises manufacturing firms that incur failures
mance. This potential future benefit from the ITI is valued by investors,
slightly more than it does for service firms.
as indicated by greater market values for ITI firms, compared to those
The impact of an ITI on banks’ performance is an important issue,
non-ITI firms [4,55].
because an ITI constitutes a substantial component of their costs, and
Stock market reactions to ITI announcements have also been in-
has a strong influence on a bank’s strategy and operations [5]. In ad-
vestigated across various countries. For instance, Ferguson et al. [20]
dition, in the banking industry, the impact of different types of ITI
investigated stock market reactions to e-commerce projects in Australia.
(services, hardware, and software) on the banks’ performance is het-
They found that Australian markets appear to react positively to ITI/e-
erogeneous. Investments in IT services from external providers, for such
commerce project announcements. IT failure is reacted negatively by
things as consulting, implementation, training and education, and
the market, as indicated by a drop in the average cumulative abnormal
support services positively influence their profits and efficiency, while
return [2]. Positive reactions to IT outsourcing, R&D, and ITI an-
the acquisition of hardware and software reduces the banks’ perfor-
nouncements are found in the capital markets of Poland [9], the USA
mance [5]. Given this unclear evidence of the impact of an ITI on banks’
[3,4,56], Japan [57] and Europe [58]. However, in the context of In-
performance [5], there still remains some doubt as to whether ITIs af-
donesia, prior studies have found no reaction to ITI announcements.
fect firms’ market values.
Hendratmoko and Achjari [59] and Achjari and Wahyuningtyas [11]
The different nature of business between banks and non-banking
found no significant market reaction around the announcement of an
firms leads to an investigation of whether ITI announcements by
ITI.
banking and non-banking firms are valued differently by investors. In
The ITI literature has documented several explanations as to why
line with past studies (e.g. [10,11,24,56,62]), this study proposes that
ITIs do not significantly affect firms’ performance or the market. First,
the market’s reaction to an ITI’s announcement, is greater for firms in
external factors such as the economic and industry conditions con-
the banking industry than for those in non-banking industries, for the
tribute to the firms’ productivity [3,51]. When the external and in-
following reasons.
dustry factors are considered, the market’s reaction towards ITI in-
First, given that the literature suggests that financial sector firms
formation is explained more by the external and industry variables,
adopt IT more aggressively than non-financial sector firms do8, the
rather than the firms’ performance. Second, prior studies also argue that
market’s reactions to ITI announcements tend to be greater for banking
increasing a firm’s performance, as a result of an ITI, may not always be
firms, relative to non-banking firms. Second, an ITI is a must in the
followed by a response from the market [23,52], for example when
banking industry, to allow it to maintain its competitive advantage. As
market conditions are unfavourable or firms are in financial distress
a consequence, an ITI by a bank is valued more by investors, relative to
[60].
other industries. In this case, investors are likely to react more to a
The third explanation is related to the time when the market’s re-
bank’s ITI announcement, relative to a non-bank’s one. Thus, in line
action towards an ITI’s announcement is determined. When making an
with prior studies, which suggest that market reactions to ITI

7 8
The term productivity paradox is used to describe that ITIs do not sig- Financial industry firms need more timely information for their business
nificantly affect firms’ performance nor firms’ market value of equity [51]. processes (e.g. [5,24,10,25]).

3
S. Wijayana and D. Achjari
announcements are greater for the finance industry firms, rather than
the non-financial industry firms; it is expected that market reactions to
ITI announcements are greater for banking firms than for non-banking
firms. Thus, the hypothesis is presented as follows:
H2a. Market reactions to ITI announcements are greater for banking
industry firms than for non-banking industry firms.
2.2.2. Firm size
Contextual factors such as size, leverage, and time period explain
the stock market’s response to ITI announcements [61]. Smaller firms
are likely to disclose less information to the public than larger firms are
[26,27]. The prior literature suggests that the market responds more to
information from smaller firms than to that of larger firms [63]. The
authors argue that less information (characterised by smaller firms) has
greater information value on the market than more information
(characterised by larger firms). This is because the information dis-
closed by small firms is worth more than that disclosed by large firms
[63]. Larger firms disclose more items, more frequently, than smaller
firms do; therefore, firm size is negatively associated with the market’s
reaction (e.g [28]). The information released by firms that less fre-
quently disclose information is worth more than the ones that disclose
more frequently. The former leads to greater surprises and attention
from the market’s participants than the latter. Correspondingly, smaller
firms are likely to announce ITI information less often than larger firms.
Once smaller firms invest and announce their investment, it comes as a
greater surprise and attracts the attention of investors to see how this
new ITI will affect the performance or productivity of the sector.
Consequently, these ITI announcements have greater information con-
tent to trigger larger market reactions.
H2b. Market reactions to ITI announcements are greater for smaller
firms than for larger firms.
2.2.3. Competitive position
Prior studies suggest that ITI plays an important role in managing
firms strategically, for example in the hotel industry (e.g. [64]) or in the
US lodging industry [65]. The timely deployment of new IT applica-
tions increases the efficiency and opportunities for services, meeting
customers’ expectations, improved control, more effective marketing
strategies, and expanded business opportunities [64,66]. The dynamic
capabilities literature suggests that firms renew their superior cap-
abilities and leverage their current asset positions to enable them to
maintain competitiveness [66,67], so firms can successfully do this
through an ITI, to respond to shifts in the business environment. To
maintain their competitive positions, firms tend to invest in IT more
aggressively, particularly in the current turbulent global environment
[68].
Prior studies indicate that ITI positively associates with company
performance, for instance sales [69], and as a source of competitive
advantage [70]. Porter and Millar [71] argue that IT contributes to
competitive advantage in two ways: enhancing differentiation and
lowering price. Companies invest in IT, so they can create more cost
effective products and provide better value than their competitors.
Therefore, by using IT, a company can sell its products more easily than
its competitors and outperforms them.
From the market’s perspective, the strategic role of an ITI can ex-
plain the variation in the stock market’s response to ITI announcements
[24]. Prior theoretical and empirical literature on capital investment
and stock returns suggest that an effective ITI increases a firm’s value
[7,10,49]. Given this positive between capital investment and equity
returns, firms with higher competitive positions probably have higher
firm value and consequently tend to experience greater market reac-
tions to their ITIs.
H2c. Market reactions to ITI announcements are greater for higher
4
Information & Management 57 (2020) 103248
competitive position firms than for lower competitive position firms.
2.2.4. First-time adopter
In the real world, a company may frequently invest in IT. For in-
stance, one particular company implemented customer relationship
management (CRM) and ERP in its first and second years, con-
secutively. Both implementations are considered to be the first invest-
ment in each year. ITIs across the period can also be similar. The first
implementation of a particular IT may cause a great surprise for the
market, while subsequent investments in the same technology may not
get much attention from investors. Therefore, the investors may re-
spond differently to the first and subsequent implementations of a
particular technology. They may expect that the company will benefit
more from the first implementation.
This study predicts that first-time IT adopter firms are likely to be
valued by investors more than late IT adopters. The underlying argu-
ment is that if firms rarely invest in IT, once they invest and announce
it, it comes as a greater surprise and attracts the attention of investors to
see how these investments will affect the performance or productivity
of the sector. Consequently, these ITI announcements have greater in-
formation content to generate a market reaction. The announcement of
first-time IT adopter firms will have a greater surprise effect, and
therefore, lead to greater market reactions [29]. They also benefit by
being a pioneer, which can bring competitive advantages for them
[65–67]. Consequently, investors tend to value first-time IT adopter
firms more than the later ones.
H2d. Market reactions to ITI announcements are greater for first-time
IT adopter firms than for later IT adopter firms.
2.2.5. The types of technology
The impact of ITI on market value can be positive or negative, de-
pending on the type of ITI [5]. ITI can vary across companies, from very
simple technology and low cost implementations, such as internet ac-
cess in an office, to very complex, lengthy, and expensive processes,
such as with ERP’s implementation. Indeed, the literature suggests that
the information technology’s capabilities relate to firms’ competitive
advantage [72]. Prior studies suggest that an ITI in ERP can increase a
firm’s accessibility for all parties and increase the firm’s efficiency
[6,30]. The use of ERP leads to a quick decision from a financial ana-
lysis, on-time sale’s reporting, inventory, and production reports [30].
For example, a study in Taiwan finds that small and medium enterprises
benefit from ERP’s implementation [73].
From the capital market’s perspective, Benco and Prather [34]
present evidence of the market’s reaction to announcements of invest-
ments in ERP systems. An investment in ERP requires greater funding
and effort than in other types of IT. It requires coordination and in-
tegration of the business’s processes amongst the business’s functions to
make it a successful investment. The differences in ITIs may lead to
different firm performance and market reactions. The variations in the
market’s reactions to announcements of investments in ERP systems are
expected, because an investment in ERP is deemed to be high risk, but
the benefits are tremendous [74]. Therefore, the announcement of
ERP’s implementation may be responded to positively by investors, due
to the future benefits of ERP. Based on these reasons, this study ex-
amines whether an ITI in ERP leads to greater market reactions, relative
to those for non-ERP investments.
H2e. Market reactions to ITI announcements are better for ERP
investment firms than for non-ERP investment firms.
3. Sample, data, and research methodology
The sample data comprise Indonesian firms listed on the Indonesia
Stock Exchange (IDX). Data from 2001 to 2016 were collected; 2001
S. Wijayana and D. Achjari
Table 1
Sample Selection.
Criteria
Firms are listed on the IDX during 2001–2016 and release ITI information
Firms’ security price, market price and specific data are unavailable
Sample potentially confounded by other information or events for both around and subsequent to the announcement of the ITI
Final sample for testing H1 and H2
was selected because many firms were expected to make ITIs after re-
covering from Indonesia’s 1998 crisis. The period of analysis finishes in
2016 due to this being the most recent year that data are available. The
sample to investigate H1 and H2 is selected based on the following
criteria: 1) the firms were listed on the IDX during the period
2001–2016; 2) the firms’ ITI information is available, so the event date
and window can be determined; 3) the firms’ security price is available
to determine the market reactions around and subsequent to the an-
nouncement of the ITI; 4) firm-specific data are available; and 5) the
date of the ITI’s announcement (the event date) by the firms is not
potentially confounded by other information or events. Table 1 presents
the outcome of the sample’s selection criteria and the number of ob-
servations employed to examine both H1 and H2.
This research mainly uses Bloomberg’s and Compustat Global’s da-
tabases and websites to source the data for this study. Firm-specific data
such as firm size and the industry sectors are collected from these da-
tabases. Google Search, Yahoo! Finance, Indonesian Business News and
Magazine and companies’ websites are used as complementary sources
of data for the ITIs’ announcements, market price data and The
Indonesian Composite Index-IDX Composite (market index).
3.1. Market reaction to ITI information
The market’s reaction towards the information’s release is in-
vestigated by using event study methodology. It is common for an event
study to extend the window for the period by more than one day.
Thompson et al. [75] noted that the precise identification of an event
window is important, for at least three reasons [76]: 1) the power of the
tests is highly sensitive to the precision of the event window’s identi-
fication; 2) misidentification of the event window is likely to reduce the
ability to observe security price movements; and 3) the precision of the
date effectively controls the potential problems presented by con-
founding events. The argument to support the extension of the length of
time is related to the uncertainty in identifying exactly when the in-
formation released is responded to by the market’s participants. Fol-
lowing prior studies, the market’s reactions around (e.g [77].) and post-
ITI announcement’s drift (e.g [44,47].) are calculated by accumulating
the daily abnormal return from day 1 to day+1 and day+2 to day+60,
respectively.9 These CAR are expressed as (Eq. 1):
3,59
CARj 3,59 = ARjt
t=1
Where CARj3,59 is the CAR for j securities for a period of 3 and 59 days
duration; j is the number of securities; and ARjt is the average daily
abnormal returns for j securities for period t.
A firm’s abnormal return (ARjt) is the difference between the firm’s
actual return (Rjt) and its expected return (E(Rjt))10 during the event
window. To calculate the actual returns, this study uses simple returns,
9
Prior studies only used several days around the ITI announcement (e.g.
[11,1,34,24,35,23]); this study employs both around and delayed event win-
dows to increase the precision of when the market reacted to the ITI an-
nouncement.
10
Some studies refer to the expected return as the normal return or the es-
timated return.
Information & Management 57 (2020) 103248
Number of Sample Firms
218
(22)
196
(17)
179
which are defined as the difference between the price for security j for
period t (Pjt) relative to the price for security j for period t - 1 (Pjt-1). To
determine the expected returns around the information event, the
market model (Eq. (2)) is applied:
E(Rjt)= j + jRmt (2)
where E(Rjt)is the expected return on security j for period t; j is the
estimated adjusted alpha ( j) for security j;11 j is the estimated
(traditional) beta ( i) for security j; for the adjusted beta, it is de-
termined using Scholes-Williams (calculated using Eq. (3)) and Dimson
(calculated using Eq. (4)); Rjt is the actual return on security j for period
t; j is the intercept of the market model and Rmt is the return on the
market portfolio (market index) for period t. The coefficients j is es-
timated using ordinary least squares of the daily market index for a 200-
day period. There must be more than 100 days of security price data
during the estimation period. To prevent the event from influencing the
normal performance model’s parameter estimates [78], returns from
the period of 10 days before the event window are excluded.
This study uses adjusted beta methods to calculate the expected
returns, as presented in Eq. (3) [31] and Eq. (4) [32]. Adjusted betas are
used to observe the thin trading problem that occurs in emerging ca-
pital markets, such as the IDX. Emerging capital markets are char-
acterised by their infrequent trading activity (thin market). Table 2
shows a summary of the number of trading days and average trading
per year (2016) and the fourth quarter of 2016. The trading activities in
each industry show that the percentage trading days, relative to one
year trading days, reached less than 75% for most industries. Only
agricultural firms had more than 75% trading activities from 249
trading days per year. The fourth quarter 2016 data indicate that the
percentage trading in the fourth quarter was slightly higher (76.30%)
than the annual figure (total average = 70.51%).
Infrequent trading activities lead to non-synchronous trading, and
therefore, the unadjusted beta is likely to result in biased beta esti-
mates. Beta, measuring volatility, is represented by covariance secur-
ity’s returns, relative to the market’s returns in the same period. The
beta becomes biased if the period t of security returns and market re-
turns are not at the same time (non-synchronous). Measured returns
often deviate from true returns because reported closing processes ty-
pically represent trades prior to the actual close of the trading day [31].
If a security is not traded for a certain period, the price of the security
(1) used to calculate beta is taken from the last period’s price (last time
traded), and this results in bias in the beta estimates. To correct this
bias, the lag and lead market returns’ models, based on Scholes and
Williams’ (1977) or Dimson’s (1979) methods, are applied.12
The Scholes-Williams’ beta ( j ) is calculated as
n 1 0 +1 +n
( j +...+ j + j + j + ... + j )
j =
(1 + 2. 1 + 2. 2 + ...+ 2. n ) (3)
where j is adjusted beta for security j; j
n
, 0
j and +n
j is the estimate of
11 ˆ. Rm , where Rj is actual return
Alpha adjusted is calculated as j = Rj
and Rm is market return.
12
This study employs three lags-leads in the main analyses. Two lags-leads
and one lag-lead are also performed for sensitivity analyses.
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S. Wijayana and D. Achjari Information & Management 57 (2020) 103248

Table 2
Summary of number of trading days and average trading per year (2016) and fourth quarter 2016.
No Industry Firms During Year 2016 During Fourth Quarter 2016

No. of Trading Av. Trades per % Trading Per Year No. of Trading Av. Trades per % Trading during Q4
Days Firm Days Firm

Formula (1) (2) (3) (4)=(3)/(2) (5)=(4)/249 (no. of (3) (4)=(3)/(2) Tabulated from the
trading days per year) data source

1 Agriculture 21 4587 218.43 87.72% 1214 57.81 91.76%

2 Mining 43 7433 172.86 69.42% 2028 47.16 74.86%
3 Basic Industry and Chemicals 66 11,765 178.26 71.59% 3231 48.95 77.71%
4 Miscellaneous Industry 42 7240 172.38 69.23% 2001 47.64 75.62%
5 Consumer Goods Industry 39 7747 198.64 79.78% 1969 50.49 80.14%
6 Property, Real Estate and 63 10,349 164.27 65.97% 3338 52.98 84.10%
Building Construction
7 Infrastructure, Utilities and 56 10,349 184.80 74.22% 2846 50.82 80.67%
Transportation
8 Finance 89 15,264 171.51 68.88% 4055 45.56 72.32%
9 Trade, Services and 122 20,255 166.02 66.68% 5324 43.64 69.27%
Investment
Total 541 94,989 175.58 70.51% 26,006 48.07 76.30%

Source: Tabulated from Indonesia Stock Exchange (IDX) Year and Fourth Quarter 2016 Statistics.

the parameter, derived from the following regressions between the that ITI leads to either better firm performance [7,10,49] or a pro-
observed security’s return (Rj, t ) and the market index’s return (RMt ), ductivity paradox [50,53].
with n lags, coincident and n leads, respectively:
Rj, t = j + j n RMt n + j, t ; Rj, t = j + j0 RMt + j, t and Rj, t = 3.2. Factors explaining the post-ITI announcement drift
j + +n R
j Mt + n + j , t .
n is the first-order serial correlation coefficient of the market re-
Further analyses are performed to investigate the factors explaining
turn’s proxy, derived from the estimate of the parameter from the fol- the market’s reaction to ITI announcements. The magnitude of the
lowing regressions: RMt = j + 1RMt 1 + j, t ; RMt = j + 2 RMt 2 + j, t market’s reaction can be different, depending on the type of industry,
and RMt = j + n RMt n + j, t . size of the firm, adoption time (first-time adopter), competitive posi-
Dimson’s beta ( j ) is calculated as tion, and the type of technology. To address these issues, this study
= n
+ ...+ 1
+ 0
+ +1
+ ...+ +n splits and compares the sample based on those factors. The t-tests are
j j j j i j (4)
performed to provide thorough analyses of the market’s reaction to the
where j , and n
is the estimate of the parameter, derived from the
0
j
+n
j announcement of an ITI. Given that the average size of the banking
following multiple regression between the observed security’s return firms is greater than non-banking firms (Table 8 ‘Descriptive Statistics’),
and the market index’s return with n lags, coincident and n leads: the endogeneity issue may be significant. To address this issue, this
j n 1 0 +1 study matches the size of the banking firms with the non-banking firms,
Rj, t = + ...+ RMt + RMt + ...+ j RMt + j RMt + 1
j n j 1
and then compares them to show whether the impact of the banking
+ ...+ +n
j RM , t + n + j, t industry is significant.
As in the previous section, the market’s reactions are measured by
Where Rj, t is the return of security j for the period t; RMt n is the mar- CAR during 3 days around (CAR3) and 59 days (CAR59) after the ITI’s
ket’s returns for the period lag t-n and RMt + n is the market’s returns for announcement, using traditional, Scholes-Williams’ and Dimson’s betas.
the period lead t + n. To support H2, the average market reactions to banking firms, large-
To examine H1, a calculation of the cross-sectional average CAR sized firms, higher competitive position firms, first-time adopter firms,
around and subsequent to the announcement of the ITI must be made and ERP firms must be significantly greater than non-banking firms,
([79]; Campbell, Lo, and [78,80]; MacKinlay, 1997).13 Following the smaller sized firms, lower competitive position firms, non-first-time
event study literature (e.g. [80]), the average CAR for a sample of j adopter firms, and non-ERP firms, respectively.
securities of cross-listed firms is calculated by using the cross-sectional
mean cumulative abnormal returns.
4. Data analyses and results
A z-test is employed to investigate whether the CARs in the around
and post-ITI announcement period are significantly different from zero.
Table 3 (Panels A, B, and C) presents descriptive information of the
To ensure that this study’s results equate to those of Achjari and
sample’s ITI announcements, based on the industry, year, and type of
Wahyuningtyas [11], this study examines market reactions around ITI
investment, respectively. The ITI of publicly listed firms on the IDX has
announcements using the same method they used in their study (tra-
been largely (91 out of 179) dominated by banking firms. Both banking
ditional market model beta) and apply it in this study’s dataset. This
and non-banking firms have invested in the following types of ITIs: e-
study also applies adjusted betas by Scholes-Williams/Dimson in the
business application projects; Enterprise Resource Planning (ERP);
event study, to ensure that appropriate methods are used in Indonesia’s
Customer Relationship Management (CRM) and Supply Chain Man-
thin market. This study considers the positive or negative effects of ITI
agement (SCM), as parts of the ERP application; e-commerce; e-money;
on the firm’s value. Analyses by dividing positive and negative ab-
Business to Business (B2B) and Business to Customer (B2C) [11]. Panel
normal returns are performed to present further insights. This sign, or
A shows that 91 observations (14 firms) are categorised as banking
the direction of the surprise effect from the announcement indicates
firms, and 43 observations (7 firms) are categorised as information and
telecommunications firms. Twenty observations (16 firms) are manu-
13
If average daily and cumulative abnormal returns exist around the event, facturing firms. Six observations are classified as construction firms.
this suggests that the earnings information is useful for investors [79,84,80,78]. One or two observations from each industry belong to various

6
S. Wijayana and D. Achjari Information & Management 57 (2020) 103248

Table 3 market reacts negatively to an IT announcement. Negative market re-

Descriptive Information of Sample’s ITI Announcements. actions occur both around and subsequent to the announcement of an
Panel A: By Industry Freq. Panel C: By Type of Freq. ITI. The table also shows that negative market reactions are greater
Investment subsequent to the ITI’s announcement (mean CAR59Mm= -2.33%;
CAR59Sch= -3.17%; and CAR59Dim= -3.24%) than for around the an-
- Accommodation and Food Service 1 - All 5
nouncement of an ITI (mean CAR3Mm= -0.31%; CAR3Sch= -0.32%; and
- Administrative and Support and Waste 1 - B2B 1
Management and Remediation
CAR3Dim= -0.32%).14 Similarly, the value of the median indicates that
Services negative market reactions, subsequent to the announcement of an ITI
- Construction 6 - B2C 8 (CAR59Mm= -2.56%; CAR59Sch= -2.53%; and CAR59Dim = -2.74%) are
- Finance and Insurance (Bank) 95 (91) - B2C, CRM 1 greater than those around the announcement (CAR3Mm= -0.46%;
- Information 43 - BI 1
CAR3Sch= -0.41%; and CAR3Dim= -0.41%). These results indicate that
- Management of Companies and 1 - BI, E-commerce, 1
Enterprises CRM, ERP market reactions to ITI announcements are likely to be responded to by
- Manufacturing 20 - BI, SCM, CRM, 3 investors during the subsequent period, rather than around the time of
B2B, B2C the announcement.
- Mining 2 - CRM 11
Furthermore, in terms of CARs’ median and variation, the tradi-
- Professional, Scientific and Technical 2 - CRM, SCM, B2B, 1
Services B2C
tional-based mean value of CAR59Mm and the median value of CAR3Mm
- Public Administration 1 - E-commerce 60 differ from those that are based on Scholes-Williams and Dimson. With
- Real Estate and Rental and Leasing 2 - E-commerce, 1 regard to the variations in CARs, Table 4 indicates that CAR3Mm has a
B2B2C larger variation (Std. Dev. = 3.83%) than CAR3Sch (Std. Dev. = 3.77%)
- Retail Trade 1 - E-commerce, B2C 1
and CAR3Dim (Std. Dev. = 3.69%). CAR59Mm has a smaller variation (Std.
- Transportation and Warehousing 1 - E-commerce, CRM 3
- Utilities 2 - E-commerce, 1 Dev. = 28.67%) than CAR59Sch (Std. Dev. = 29.58%) and CAR3Dim (Std.
CRM, ERP Dev. = 29.78%). The minimum and maximum values of CAR59Mm (Min
- Wholesale Trade 1 - E-commerce, e- 3 = -132.34%; Max = 113.39%) tend to be smaller than CAR59Sch. (Min
money = -129.95%; Max = 118.81%) and CAR59Dim (Min = -130.91%;
Total 179 - E-commerce, SCM 6
Panel B: By Year Freq. - E-commerce, 1
Max = 122.32%). The minimum values of CAR3Mm (Min = -16.26%) is
SCM, CRM between CAR3Sch. (Min = -16.53%) and CAR3Dim (Min = -15.99%), but
−2001 5 - E-commerce, 3 for the maximum values, CAR3Mm (Max = 14.66%) is greater than
SCM,B2B2C CAR3Sch (Min = 11.20%) and CAR3Dim (Max = 11.27%). Overall, the
−2002 9 - ERP 37
descriptive statistics show that CARs calculated using the traditional
−2003 7 - ERP/SAP 4
−2004 19 - ERP, B2B 1 beta of the market model do differ from those calculated using Scholes-
−2005 14 - ERP, BI, SCM 1 Williams and Dimson. Given that the results of CARs’ calculations using
−2006 13 - ERP, CRM 2 the adjusted beta are likely to capture the market’s reactions, these
−2007 15 - ERP, CRM, BI 1 results support this study’s idea that Scholes-Williams and Dimson are
−2008 2 - ERP, CRM, E- 1
commerce
better for Indonesia’s thin market context.
−2009 3 - ERP, E-commerce 1 Market reactions post-ITIs’ announcements are calculated by sub-
−2010 4 - ERP, SCM 9 tracting the average estimated return from the average (actual) return.
−2011 7 - ERP, SCM, CRM 2 If the result is significantly different from zero, it indicates the presence
−2012 15 - SCM 5
of a market reaction. The significance test of the market’s reactions for
−2013 24 - SCM, B2B 1
−2014 19 - SCM, B2C 1 the mean difference between the average estimated returns and the
x µ
−2015 13 - SCM, E-commerce 1 average (actual) returns is conducted using a z-test: Z = / n , where, x
−2016 10 - SCM, ERP 1 is the average (actual) return (R) in the event window period; μ is the
Total 179 Total 179
average estimated return (E(R)) in the event window period; σ is the
variance and n is the number of events.15 Given that the descriptive
industries. statistics indicate negative market reactions, this study uses a one-tailed
Panel B shows that the highest number of ITIs was in 2013 with 24 z-test to investigate whether the CARs59 are significantly smaller than
announcements, followed by the years 2004 and 2014 with 19 an- zero.
nouncements. During the global economic crisis (2008–2009), the The tests are conducted for both CAR3 (to be comparable with
number of ITIs tended to be low, relative to the prior- or post-crisis Achjari and Wahyuningtyas) [11] and CAR59 (this study expects to
periods. Panel C shows the distribution of the sample by the type of ITI. observe a market reaction post-IT announcement). To be consistent
A number of firms made more than one type of ITI at one event. The with Achjari and Wahyuningtyas (2014), beta is determined using the
type of ITI is dominated by e-commerce (60 investments) and ERP/ traditional market model. Scholes-Williams’ and Dimson’s methods are
Systems Applications and Products (SAP) (41 investments). The third also applied in the context of this study when using Indonesia’s thin
type of ITI is dominated by CRM (11 investments). market as the sample. As presented in Table 5 column 2–4, the result of
the z-test of the market’s reaction around the ITI’s announcement shows
that CAR3Mm, is not significantly greater nor smaller than zero (z-value
4.1. Results of H1 test = -0.537; p-value = 0.296). It indicates no immediate market reactions
around the announcement of an ITI in Indonesia. Hence, the current
To test H1, this study calculates the daily CAR using 3 methods study that uses a longer sample period (2001–2016) presents similar
based on the market model with betas estimated by employing: the
traditional method (CARMm), Scholes-Williams’ method (CARSch) [31],
and Dimson’s method (CARDim) [32]. Table 4 presents the CAR for both 14
This study interprets the greater number of negative values as greater ne-
around (CAR3) and subsequent to (CAR59) the announcement of an ITI. gative market reactions because greater differences from zero indicate greater
There are 179 observations that consist of 91 banking firm events and market reactions.
88 non-banking firm events. 15
The z-test is normally used to investigate whether the cumulative abnormal
Descriptive statistics in Table 4 suggest interesting facts, including returns during the information’s announcement period are significantly greater
that the value of CARs is negative. It indicates that on average, the or smaller than zero.

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S. Wijayana and D. Achjari Information & Management 57 (2020) 103248

Table 4
Descriptive Statistics of Variables Used to Test H1.
Statistics CAR3Mm CAR3Sch CAR3Dim CAR59Mm CAR59Sch CAR59Dim

N 179 179 179 179 179 179

Mean −0.31% −0.32% −0.32% −2.33% −3.17% −3.24%
Std. Dev. 3.83 % 3.77 % 3.69 % 28.67 % 29.58 % 29.78 %
Median −0.46% −0.41% −0.41% −2.56% −2.53% −2.74%
Minimum −16.26% −16.53% −15.99% −132.34% −129.95% −130.91%
Maximum 14.66 % 11.20 % 11.27 % 113.39 % 118.81 % 122.32 %

CAR3 and CAR59 = cumulative abnormal returns as measured by the cumulative average abnormal returns for j firms for a 3- and 59-day period, respectively; for
CARMm, CARSch, and CARDim, the expected returns are calculated using the traditional, Scholes-Williams, and Dimson’s methods, respectively.

Table 5 Table 6
The Results of Testing H1 (Z-test). The Results of Testing H1 (z-test): Division of Positive and Negative CARs.
CAR3Mm CAR3Sch CAR3Dim CAR59Mm CAR59Sch CAR59Dim CAR3Mm CAR3Sch CAR3Dim CAR59Mm CAR59Sch CAR59Dim
Panel A: Positive Market Reaction
N 179 179 179 179 179 179
z-value −1.073 −1.127 −1.153 −1.089 −1.433 −1.458 N 73 76 76 79 80 79
p-value 0.142 0.130 0.125 0.138 0.076* 0.072* z-value 7.987 9.175 8.974 7.058 6.764 6.722
p-value 0.000*** 0.000*** 0.000*** 0.000*** 0.000*** 0.000***
CAR3 and CAR59 = cumulative abnormal returns as measured by the cumula-
tive average abnormal returns for j firms for a 3- and 59-day period, respec- Panel B: Negative Market Reaction
tively; for CARMm, CARSch, and CARDim, the expected returns are calculated
N 106 103 103 100 99 100
using the traditional, Scholes-Williams, and Dimson’s methods, respectively. *
z-value −9.506 −9.018 −9.220 −8.559 −8.480 −8.487
denote significance at 10% level, one-tailed test.
p-value 0.000*** 0.000*** 0.000*** 0.000*** 0.000*** 0.000***

results to the study by Achjari and Wahyuningtyas (2014) that used a
shorter sample period (2000–2007).
Considering Indonesia’s thin market, this study also applies Scholes-
Williams’ method as well as Dimson’s method, to investigate the mar-
ket’s reaction around an ITI’s announcement. As predicted, we find no
immediate market reaction around the announcement of an ITI.
CAR3Sch and CAR3Dim are not significantly greater or smaller than zero.
The z-value and p-value of CAR3Sch are -0.283 and 0.389, respectively.
The z-value and p-value of CAR3Dim are -0.416 and 0.339, respectively.
To provide empirical evidence for the first hypothesis, market re-
actions subsequent to the ITI’s announcement (during day+2 to day
+60) are tested. The results are reported in Table 5 column 5-7. The
result of the z-test of the market’s reaction around the ITI’s announce-
ment shows that CAR59Mm, CAR59Sch, and CAR59Dim are significantly
smaller than zero with z-values of -1.089, -1.433, and -1.458, respec-
tively (p-values of 0.138, 0.076, and 0.072, respectively). These results
indicate that the use of the adjusted beta in CAR59Sch and CAR59Dim in a
thin market are likely to capture abnormal returns better than the use of
the adjusted beta in the traditional market model. The results suggest
that Indonesian investors subsequently react to the announcement of an
ITI. The investors tend to delay their response, or are less likely to
immediately respond to ITI announcements.
Prior studies suggest that positive stock price reactions may be
cancelled out by negative ones [22,23]. Positive abnormal returns re-
flect favourable reactions to an announcement. Conversely, negative
abnormal returns reflect unfavourable reactions to an announcement.
Investors may react positively or negatively, depending on the ITI’s
impact on the firm’s performance. Following Oh et al. [22], the current
study tests the market’s reactions post-ITI announcement, by separating
the positive and negative abnormal returns for both CAR3 and CAR59.
The results are shown in Table 6 Panel A for the positive market re-
actions and Panel B for the negative market reactions. Interestingly, the
results indicate that the market’s reactions are detected around the
investment’s announcement when separation between the positive and
negative reactions is applied. Positive reactions presented in Panel A
demonstrate that CAR3Mm, CAR3Sch, and CAR3Dim are significantly
greater than zero, at 1% level of significance. Similarly, negative re-
actions presented in Panel B indicate that CAR3Mm, CAR3Sch, and
CAR3Dim are significantly smaller than zero, at 1% level of significance.
These results present further insights, beyond the empirical
CAR3 and CAR59 = cumulative abnormal returns as measured by the cumula-
tive average abnormal returns for j firms for a 3- and 59-day period, respec-
tively; for CARMm, CARSch, and CARDim, the expected returns are calculated
using the traditional, Scholes-Williams, and Dimson’s methods, respectively.
*** denote significance at 1 % level, one-tailed test.
evidence in a study by Achjari and Wahyuningtyas [11] that did not
separate positive and negative market reactions, nor found market re-
actions around the ITI’s announcement. Similarly, this study also finds
no market reaction when a z-test is applied to all of the observations
(positive and negative CAR are not separately analysed). Prior studies
present a plausible explanation that positive and negative stock price
reactions may cancel each other out, leading to less likelihood of cap-
turing precise market reactions [22,23].
The results for CAR59 in Table 6 show that p-values of the z-test are
smaller than the critical value, at 1% level of significance. These results
indicate that the CAR59 are significantly greater than zero in positive
market reactions (Panel A) and significantly smaller than zero in ne-
gative market reactions (Panel B). The z-value is slightly greater when
the positive CAR are determined using the traditional market model
(CAR59Mm = 7.058) than when using Scholes-Williams
(CAR59Sch = 6.764) and Dimson (CAR59Dim = 6.722). In terms of the
negative CAR, the z-value of the negative CARs determined using the
traditional market model (CAR59Mm=-8.559) is slightly smaller than
when using Scholes-Williams (CAR59Sch = -8.480) or Dimson
(CAR59Dim=-8.487).
4.2. Results of H2 test
In this section, the market’s reactions are explained by industry,
size, competitive position, first-time IT adopter firms and the types of
technology (H2). We split the sample based on these factors and em-
ployed t-tests to investigate how significantly they affect market reac-
tions. Given that this study finds both positive and negative market
reactions to ITI announcements, this study’s t-test results are presented,
without (CAR) and with absolute values of the abnormal return
(Cumulative Average Absolute-Abnormal Return (CAAR)). The use of
absolute values removes directionality from the return measures and
permits the aggregation of returns with negative and positive abnormal
returns (e.g. [81,82]), allowing this study to compare the difference in

8
S. Wijayana and D. Achjari Information & Management 57 (2020) 103248

Table 7
The Results of Comparing Market Reactions between Banking and non-Banking Firms.
Bank Non- Bank Non- Bank Non- Bank Non- Bank Non- Bank Non-Bank
Bank Bank Bank Bank Bank
Panel A CAR3Mm CAR3Sch CAR3Dim CAR59Mm CAR59Sch CAR59Dim

Mean 0.0037 −0.0013 −0.0019 0.0022 −0.0018 0.0021 −0.0424 −0.0238 −0.0529 −0.0281 −0.0533 −0.0285
Variance 0.0008 0.0014 0.0013 0.0007 0.0012 0.0007 0.0582 0.0137 0.0627 0.0123 0.0628 0.0124
N 90 90 90 90 90 90 90 90 90 90 90 90
t Stat 1.0132 −0.8367 −0.8100 −0.5842 −0.7850 −0.7819
p-value 0.1569 0.2025 0.2101 0.2803 0.2173 0.2182

Panel B CAAR3Mm CAAR3Sch CAAR3Dim CAAR59Mm CAAR59Sch CAAR59Dim

Mean 0.0506 0.0343 0.9912 0.0337 0.0526 0.0338 0.9912 0.6460 1.0158 0.6577 1.0150 0.6589
Variance 0.0017 0.0005 0.5673 0.0005 0.0017 0.0005 0.5673 0.0716 0.5733 0.0983 0.5710 0.1015
N 90 90 90 90 90 90 90 90 90 90 90 90
t Stat 3.5793 12.1112 4.2487 4.9490 5.1259 5.1068
p-value 0.0003*** 0.0000*** 0.0000*** 0.0000*** 0.0000*** 0.0000***

CAR3 and CAR59 = cumulative abnormal returns as measured by the cumulative average abnormal returns for j firms for a 3- and 59-day period, respectively; for
CARMm, CARSch, and CARDim, the expected returns are calculated using the traditional, Scholes-Williams, and Dimson’s methods, respectively. The cumulative average
absolute-abnormal returns are employed to determine CAAR. *** denote significance at 1 % level, one-tailed test.

the magnitude of the market’s reactions based on industry, size, com-
petitive position, first-time adopter and the types of technology.
4.2.1. Industry
To examine the impact of industry, this study runs a t-test to ex-
amine whether market reactions around and subsequent to ITIs’ an-
nouncements by banking firms are significantly smaller than those for
non-banking firms. Given that banking firms are likely to be bigger,
relative to non-banking firms, we run paired sample t-tests by matching
the size of the banking firms with the non-banking firms, to control for
the impact of firm size. This study matches 91 observations of banking
firms with the least different (size wise) non-banking firms. Table 7
presents the results of the t-tests’ mean comparison between banking
and the matching-size non-banking firms for both the market’s reac-
tions around (CAR3) and subsequent to an ITI’s announcement (CAR59).
This study finds that mean value CAR3Mm for banking firms (0.0037)
is higher than for non-banking firms (-0.0013). When CAR3 is calcu-
lated using the adjusted model, the mean values of both CAR3Sch
(-0.0019) and CAR3Dim (-0.0018) for banking firms are smaller than
those for non-banking firms (mean = 0.0022 and 0.0021, respectively).
For the market’s reactions subsequent to the ITI’s announcement, this
study finds consistent results of greater negative market reactions to
banks’ than to non-banks’ ITI announcements. Nonetheless, all of the p-
values indicate that the differences are not statistically significant.
This study’s further investigation using CAAR, as presented in
Table 7 Panel B, shows the average market reactions to banking firms
(mean CAAR3Mm = 0.0506; CAAR3Sch = 0.9912; CAAR3Dim = 0.0526;
CAAR59Mm = 0.9912; CAAR59Sch = 1.0158 and CAAR59Dim = 1.0150)
that are greater than non-banking firms (mean CAAR3Mm = 0.0343;
CAAR3Sch = 0.0337; CAAR3Dim = 0.0338; CAAR59Mm = 0.6460;
CAAR59Sch = 0.6577; and CAAR59Dim = 0.6589). They are statistically
significant at the 1% level for both around and subsequent to ITI an-
nouncements, either calculated using traditional or adjusted betas.
Mean values of CAAR3 and CAAR59 calculated using adjusted methods
tend to be greater than those calculated using the traditional method.
Overall, this study interprets these results as evidence that investors’
respond to ITI announcements by banking firms more than non-banking
firms, regardless of the firm’s size. These results are in line with prior
studies, which suggest that ITIs should be more important for service
firms than for other types of firms [10]. The different nature of the
financial and non-financial industries, in the manner of their ITIs [35],
is valued differently by investors. They expect that the market’s reac-
tions to ITIs by financial firms are greater than those for non-financial
firms. Empirical evidence from this study support the expectations of
Dos Santos et al. [10].
4.2.2. Firm size
Prior studies suggest that the market responds more to information
from smaller firms than to that of larger firms, because the information
disclosed by small firms is worth more than that disclosed by large firms

Table 8
The Results of Comparing Market Reactions between Larger and Smaller Firms.
Larger Smaller Larger Smaller Larger Smaller Larger Smaller Larger Smaller Larger Smaller
Panel A CAR3Mm CAR3Sch CAR3Dim CAR59Mm CAR59Sch CAR59Dim

Mean −0.0098 −0.0004 −0.0084 −0.0011 −0.0089 −0.0010 −0.0247 −0.0217 −0.0390 −0.0279 −0.0373 −0.0296
Variance 0.0003 0.0019 0.0003 0.0019 0.0003 0.0018 0.0110 0.1124 0.0129 0.1193 0.0125 0.1211
N 51 126 51 126 51 126 51 126 51 126 51 126
t Stat −1.9991 −1.5767 −1.7362 −0.0887 −0.3225 −0.2228
p-value 0.0236** 0.0583* 0.0421** 0.4647 0.3737 0.4120

Panel B CAAR3Mm CAAR3Sch CAAR3Dim CAAR59Mm CAAR59Sch CAAR59Dim

Mean 0.0322 0.0596 0.0327 0.0614 0.0327 0.0610 0.6196 1.1743 0.6347 1.2097 0.6322 1.2081
Variance 0.0002 0.0047 0.0002 0.0046 0.0002 0.0046 0.0298 0.5977 0.0379 0.6016 0.0357 0.6039
N 51 126 51 126 51 126 51 126 51 126 51 126
t Stat −4.2361 −4.4826 −4.4290 −7.5996 −7.7407 −7.7695
p-value 0.0000*** 0.0000*** 0.0000*** 0.0000*** 0.0000*** 0.0000***

CAR3 and CAR59 = cumulative abnormal returns as measured by the cumulative average abnormal returns for j firms for a 3- and 59-day period, respectively; for
CARMm, CARSch, and CARDim, the expected returns are calculated using the traditional, Scholes-Williams, and Dimson’s methods, respectively. The cumulative average
absolute-abnormal returns are employed to determine CAAR. *** denote significance at 1 % level, one-tailed test.

9
S. Wijayana and D. Achjari
[63]. Larger firms disclose more items, more frequently, than the
smaller firms do; therefore, firm size is negatively associated with the
market’s reaction (e.g [28].). To examine the impact of size, this study
splits the sample into above and below average, based on firms’ total
assets. This study documents that 51 firms are above average and the
remaining 126 firms are below average. Independent sample t-tests are
employed to investigate whether a greater size is likely to have a
smaller reaction, relative to those of a smaller size.
Table 8 presents the results of comparing market reactions between
larger and smaller firms. Mean values of the market’s reactions to ITI
announcements are negative for both larger and smaller firms. Panel A
of Table 8 shows that the negative mean values around ITI announce-
ments by larger firms (mean CAR3Mm = -0.0098; CAR3Sch = -0.0084;
and CAR3Dim = -0.0089) are significantly smaller than those for smaller
firms (mean CAR3Mm = -0.0004; CAR3Sch = -0.0011; and CAR3Dim =
-0.0010) at the 5% and 10% levels of significance. For the market’s
reaction post the ITI’s announcement, the negative mean values are
likely to be smaller for larger firms (CAR59Mm = -0.0247; CAR59Sch =
-0.0390; and CAR59Dim = -0.0373) than those for smaller firms
(CAR59Mm = -0.0217; CAR59Sch = -0.0279; and CAR59Dim = -0.0296).
However, the mean differences are not statistically significant.
This study’s further examination using CAAR, as presented in
Table 8 Panel B, finds that all the mean values around and post-ITI
announcements for larger firms are smaller (negative t-value) than those
for smaller firms with p-values of lower than 5% level of significance.
These results apply for market reactions calculated using either tradi-
tional or adjusted betas. 16 CAAR3Mm and CAAR59Mm for larger firms are
0.0322 and 0.6169, respectively; while CAAR3Mm and CAAR59Mm for
smaller firms are 0.0596 and 1.1743, respectively. Similar figures apply
for market reactions calculated using the adjusted betas. These results
support this study’s hypothesis that ITI information disclosed by small
firms is worth more than that disclosed by large firms.
4.2.3. Competitive position
To maintain their competitive position, firms tend to invest in IT
more aggressively, particularly with the current global competition. In
this study, the competitive position of the firm is indicated by the firm’s
sales revenue relative to its competitors (its market share). Therefore, to
examine the impact of firms’ competitive position on the market’s re-
action to ITI announcements, the sample is divided into above and
below average sales revenues. Firms with above average sales revenue
are deemed to have a higher competitive position than the below
average ones. This study documents that 54 firms’ sales revenues are
above average and 123 firms are below average. Independent sample t-
tests are employed to investigate whether the market reacts more to-
wards ITI announcements from higher sales revenue firms than lower
sales revenue firms.
Table 9 presents the comparison of the market’s reactions between
higher and lower competitive position (HCP and LCP) firms. The mean
values of the market’s reactions to ITI announcements are likely to be
negative for both HCP and LCP firms. Table 9 Panel A shows that the
negative mean values for around ITI announcements, for HCP firms
(mean CAR3Mm = -0.0062; CAR3Sch = -0.0049; and CAR3Dim =
-0.0053), are greater than for LCP firms (mean CAR3Mm = -0.0016;
CAR3Sch = -0.0024; and CAR3Dim = -0.0022). Nonetheless, the mean
differences are not statistically significant. In terms of the market’s
reaction subsequent to the ITI’s announcement, the negative mean va-
lues of HCP firms (CAR59Mm = 0.0010; CAR59Sch = -0.0060; and
CAR59Dim = -0.0051) are smaller than those of LCP firms (CAR59Mm =
-0.0351; CAR59Sch = -0.0440; and CAR59Dim = -0.0456). None of these
mean differences are statistically significant.
16
The mean values of CAAR for both larger and smaller firms tend to be
greater for the market’s reactions subsequent to than around the ITI’s an-
nouncement.
10
Information & Management 57 (2020) 103248
CAARs are used to further examine the effect of competitive position
on the market’s reaction. As presented in Panel B of Table 8, this study
finds that all the mean values around and subsequent to ITI an-
nouncements for HCP firms are smaller than those for LCP firms. The
mean differences are significant at the 1% level for market reactions
calculated using both the traditional and adjusted betas. The results of
the traditional market model’s calculation suggest that the CAAR of
HCP firms (CAAR3Mm and CAAR59Mm are 0.0279 and 0.6299, respec-
tively) is smaller than that of the LCP firms (CAAR3Mm and CAAR59Mm
are 0.0613 and 1.1844, respectively). Furthermore, the market reac-
tions calculated using adjusted betas (CAAR3Dim, CAAR3Sch, CAAR59Dim,
and CAAR59Sch), as seen in Panel B of Table 8, indicate similar figures to
those for the traditional ones. The test results of the traditional and
adjusted betas demonstrate that the competitive position of a firm is
negatively responded to by investors. Contrary to this study’s predic-
tion, the announcements by LCP firms attract greater responses from
investors.
4.2.4. First-time adopter
The current study predicts that first-time adopters will be more
valued by investors than late IT adopters. The underlying argument is
that the announcements by first-time IT adopter firms supply a greater
surprise effect, and therefore, lead to greater market reactions [29].
They also benefit as pioneers, which can bring competitive advantages
for them [65–67]. Consequently, investors tend to value first-time IT
adopter firms more than the later ones. To test the hypothesis, the
earliest ITI announcement date is selected. This study identifies a first-
time adopter firm for every announced investment. For example, across
the 16 years, firms invest in IT several times, for the different types of
investment, such as ERP, CRM, SCM, e-commerce, e-money, B2B, and
B2C. This study categorises a particular firm as a first-time adopter
when the announcement date is before the other firms, during this
study’s sample period. Ninety-four out of 179 firms are identified as
first-time adopters. An independent sample t-test is employed to in-
vestigate whether the earlier adoption time is associated with greater
market reactions.
Table 10 Panel A presents the results of the t-test’s mean comparison
between first-time IT adopters and late IT adopters for both the mar-
ket’s reactions around (CAR3Mm, CAR3Sch, and CAR3Dim) and subsequent
to an ITI’s announcement (CAR59Mm, CAR59Sch, and CAR59Dim). In terms
of the market’s reaction around the announcement, the results of the
traditional model demonstrate a negative mean value for CAR3Mm for
first-time IT adopters (-0.0030), which is greater than for late adopters
(-0.0013). Furthermore, when the market’s reactions around the an-
nouncement are calculated using the adjusted model, the mean values
of both CAR3Sch (-0.0026) and CAR3Dim (-0.0025) for first-time IT
adopters are smaller than those of late adopters (mean = -0.0035 and
-0.0036, respectively). In terms of the market’s reactions subsequent to
the ITI’s announcement, this study finds that the negative market re-
actions to first-time IT adopters firms in CAR59Mm and CAR59Sch are
smaller than those for the late IT adopter firms. However, CAR59Dim
indicates the opposite result. Nevertheless, all of the p-values indicate
that the differences are not statistically significant.
As presented in Panel B of Table 10, the use of absolute values for
the abnormal returns show that the average market reactions to first-
time IT adopters firms (mean CAAR3Mm = 0.0633; CAAR3Sch = 0.0641;
CAAR3Dim = 0.0634; CAAR59Mm = 1.2379; CAAR59Sch = 1.2862; and
CAAR59Dim = 1.2832) are greater than for later IT adopter firms (mean
CAAR3Mm = 0.0386; CAAR3Sch = 0.0409; CAAR3Dim = 0.0407;
CAAR59Mm = 0.7551; CAAR59Sch = 0.7657; and CAAR59Dim = 0.7638).
The mean differences are statistically significant at the 1% level for
both around (CAAR3Mm, CAAR3Sch, and CAAR3Dim) and subsequent to
ITI announcements (CAAR59Mm, CAAR59Sch, and CAAR59Dim), both cal-
culated using traditional and adjusted betas. The mean values of CAARs
calculated using adjusted methods (CAAR3Sch, CAAR3Dim, CAAR59Sch,
and CAAR59Dim) tend to be greater than those calculated using the
S. Wijayana and D. Achjari Information & Management 57 (2020) 103248

Table 9
The Results of Market Reaction Comparison between Higher and Lower Competitive Position.
HCP LCP HCP LCP HCP LCP HCP LCP HCP LCA HCA LCA
Panel A CAR3Mm CAR3Sch CAR3Dim CAR59Mm CAR59Sch CAR59Dim

Mean −0.0062 −0.0016 −0.0049 −0.0024 −0.0053 −0.0022 0.0010 −0.0351 −0.0060 −0.0440 −0.0051 −0.0456
Variance 0.0003 0.0020 0.0003 0.0019 0.0003 0.0018 0.0080 0.1159 0.0083 0.1235 0.0078 0.1254
N 54 123 54 123 54 123 54 123 54 123 54 123
t Stat −0.9619 −0.5504 −0.6843 1.0938 1.1183 1.1862
p-value 0.1687 0.2914 0.2473 0.1379 0.1326 0.1187

Panel B CAAR3Mm CAAR3Sch CAAR3Dim CAAR59Mm CAAR59Sch CAAR59Dim

Mean 0.0297 0.0613 0.0302 0.0632 0.0300 0.0628 0.6299 1.1844 0.6373 1.2248 0.6340 1.2230
Variance 0.0002 0.0048 0.0002 0.0046 0.0002 0.0046 0.0312 0.6069 0.0381 0.6061 0.0362 0.6083
N 54 123 54 123 54 123 54 123 54 123 54 123
t Stat −4.8754 −5.1167 −5.1033 −7.4678 −7.8281 −7.8601
p-value 0.0000*** 0.0000*** 0.0000*** 0.0000*** 0.0000*** 0.0000***

CAR3 and CAR59 = cumulative abnormal returns as measured by the cumulative average abnormal returns for j firms for a 3- and 59-day period, respectively; for
CARMm, CARSch, and CARDim, the expected returns are calculated using the traditional, Scholes-Williams, and Dimson’s methods, respectively. The cumulative average
absolute-abnormal returns are employed to determine CAAR. *** denote significance at 1 % level, one-tailed test.

Table 10
The Comparison of Market Reactions to First-time IT Adopters and Later Adopters Firms.
First-time Later First-time Later First-time Later First-time Later First-time Later First-time Later
Panel A CAR3Mm CAR3Sch CAR3Dim CAR59Mm CAR59Sch CAR59Dim

Mean −0.0030 −0.0028 −0.0026 −0.0035 −0.0025 −0.0036 −0.0197 −0.0257 −0.0309 −0.0310 −0.0323 −0.0310
Variance 0.0021 0.0007 0.0020 0.0008 0.0019 0.0008 0.1302 0.0293 0.1416 0.0279 0.1441 0.0275
N 94 83 94 83 94 83 94 83 94 83 94 83
t Stat −0.0292 0.1748 0.2092 0.1446 0.0016 −0.0302
p-value 0.4884 0.4307 0.4173 0.4426 0.4994 0.4880

Panel B CAAR3Mm CAAR3Sch CAAR3Dim CAAR59Mm CAAR59Sch CAAR59Dim

Mean 0.0633 0.0386 0.0641 0.0409 0.0637 0.0407 1.2379 0.7551 1.2862 0.7657 1.2832 0.7638
Variance 0.0058 0.0008 0.0056 0.0008 0.0056 0.0008 0.7503 0.0926 0.7524 0.0901 0.7556 0.0899
N 94 83 94 83 94 83 94 83 94 83 94 83
t Stat 2.9370 2.7723 2.7395 5.0615 5.4589 5.4385
p-value 0.0020*** 0.0032*** 0.0035*** 0.0000*** 0.0000*** 0.0000***

CAR3 and CAR59 = cumulative abnormal returns as measured by the cumulative average abnormal returns for j firms for a 3- and 59-day period, respectively; for
CARMm, CARSch, and CARDim, the expected returns are calculated using the traditional, Scholes-Williams, and Dimson’s methods, respectively. The cumulative average
absolute-abnormal returns are employed to determine CAAR. *** denote significance at 1 % level, one-tailed test.

traditional method. Overall, this study interprets these results as evi-
dence that investors respond to first-time IT adopters firms more than
the later ones. These results support this study’s hypothesis.
4.2.5. The types of technology
Prior studies suggest that an ITI in ERP can increase a firm’s ac-
cessibility to all the parties, and thus increase the firm’s efficiency
[6,30]. A quick decision can be made through ERP by providing an
inventory and production reports, on-time sale’s reporting, and fi-
nancial analysis [30]. An ITI in ERP requires greater funding and effort
than the other types of ITIs. It requires the coordination and integration
of a business’s processes amongst the business’s functions to make it a
successful investment. On the basis of these reasons, this study divides
the sample into ERP and non-ERP types of ITIs. An independent sample
t-test is employed to investigate whether an ITI in ERP leads to greater
market reactions relative to those for non-ERP ITIs.
Table 11 Panel A shows the results of the market reactions com-
parison between ERP and non-ERP investments. Surprisingly, the mean
values of the market’s reaction to an ITI’s announcement are negative
for both ERP and non-ERP investments. In the context of the market’s
reactions around ITI announcements, Panel A of Table 11 shows that
the negative mean values of ERP investment firms (mean CAR3Mm =
-0.0059; CAR3Sch = -0.0045; and CAR3Dim = -0.0044) are greater than
those of non-ERP investment firms (mean CAR3Mm = -0.0013; CAR3Sch
= -0.0024; and CAR3Dim = -0.0024). Also, the negative mean values of
the market’s reaction subsequent to the ITI’s announcement are greater
for ERP investment firms (CAR59Mm = -0.0495; CAR59Sch = -0.0593;
and CAR59Dim = -0.0606) than those for non-ERP investment firms
(CAR59Mm = -0.0100; CAR59Sch = -0.0173; and CAR59Dim = -0.0178).
The mean differences are not statistically significant for market reac-
tions around and subsequent to ITI announcements.
Further examination using CAAR, as presented in Table 11 Panel B,
finds that all the mean values around and subsequent to an ITI’s an-
nouncement by ERP investment firms are greater than those for non-
ERP investment firms, at the 1% and 5% levels of significance. These
results apply for market reactions calculated using both the traditional
and adjusted betas. CAAR3Mm and CAAR59Mm for ERP investment firms
are 0.0670 and 1.2842, respectively; while CAAR3Mm and CAAR59Mm for
non-ERP investment firms are 0.0427 and 0.8464, respectively. Similar
results also apply for the market’s reactions calculated using adjusted
betas (CAAR3Sch, CAAR3Dim, CAAR59Sch, and CAAR59Dim). These results
support this study’s hypothesis that the market reacts more to an ERP
investment than it does to non-ERP investments.
4.3. Sensitivity analyses
Sensitivity analyses are performed to check the robustness of the
findings. They are related to: 1) the use of CAR5; 2) the use of one and
two lags-leads of calculating betas; and 3) the use of alternative event
windows for the post-ITI announcement drift. The results of using CAR5

11
S. Wijayana and D. Achjari Information & Management 57 (2020) 103248

Table 11
The Comparison of Market Reactions between ERP and Non-ERP.
ERP Non-ERP ERP Non-ERP ERP Non-ERP ERP Non-ERP ERP Non-ERP ERP Non-ERP
Panel A CAR3Mm CAR3Sch CAR3Dim CAR59Mm CAR59Sch CAR59Dim

Mean −0.0059 −0.0013 −0.0045 −0.0024 −0.0044 −0.0024 −0.0495 −0.0100 −0.0593 −0.0173 −0.0606 −0.0178
Variance 0.0019 0.0012 0.0020 0.0011 0.0019 0.0011 0.1741 0.0292 0.1800 0.0343 0.1831 0.0343
N 66 111 66 111 66 111 66 111 66 111 66 111
t Stat −0.7182 −0.3311 −0.3268 −0.7333 −0.7622 −0.7714
p-value 0.2370 0.3706 0.3722 0.2328 0.2241 0.2214

Panel B CAAR3Mm CAAR3Sch CAAR3Dim CAAR59Mm CAAR59Sch CAAR59Dim

Mean 0.0670 0.0427 0.0690 −0.0024 0.0685 0.0437 1.2842 0.8464 1.3308 0.8679 1.3253 0.8673
Variance 0.0074 0.0011 0.0073 0.0011 0.0072 0.0011 0.6789 0.3230 0.6921 0.3219 0.6848 0.3300
N 66 111 66 111 66 111 66 111 66 111 66 111
t Stat 2.2036 6.5098 2.2677 3.8110 4.0010 3.9640
p-value 0.0153** 0.0000*** 0.0131** 0.0001*** 0.0001*** 0.0001***

CAR3 and CAR59 = cumulative abnormal returns as measured by the cumulative average abnormal returns for j firms for a 3- and 59-day period, respectively; for
CARMm, CARSch, and CARDim, the expected returns are calculated using the traditional, Scholes-Williams, and Dimson’s methods, respectively. The cumulative average
absolute-abnormal returns are employed to determine CAAR. *** and ** denote significance at 1 % and 5% level, respectively, one-tailed test.

are similar to those in the main analyses. Overall, CAR5 are identified as
being significantly greater (smaller) than zero when positive and ne-
gative market reactions are analysed separately. When one and two
lags-leads of calculating betas are used to analyse the market reaction
subsequent to ITI, the results are similar to those in the main analyses
(three lags-leads), but weaker in terms of having smaller z-value and
significant at the 10% level. The results of using alternative event
windows17 subsequent to an ITI announcement show that alternative 1
(day+2 to day+10) has the weakest market reactions. Strongest
market reactions (greatest different from zero) are found during the
alternative 3 (day+30 to day+60). These results can be interpreted as
an indication that after the event date’s market reactions, delayed
market reactions are also found. On average, the reactions are robustly
captured during day+30 to day+60. The results from these sensitivity
analyses are untabulated but available upon request.
5. Summary and conclusion
While most of the prior studies investigate the market’s reactions
around an ITI’s announcement, this study examines the market’s reac-
tions both around and subsequent to the announcement of an ITI. Both
the traditional beta (the same method as Achjari and Wahyuningtyas)
[11] and the adjusted beta of Scholes-Williams’ and Dimson’s betas
(considered as appropriate for Indonesia’s thin capital market) are
employed. This study finds that the results suggest that the CAR sub-
sequent to the announcements of ITIs are significantly different from
zero (supporting H1). Detailed analyses indicate that the effects of ITIs
on the firms’ market values are better captured by using the adjusted
betas than the traditional beta. By considering a separation between the
positive and negative abnormal returns, investors capture the signals of
either an increase or decrease in value from an ITI. This evidence adds
further insights into how the market’s reactions both around and sub-
sequent to an ITIs’ announcement are identified, given that prior studies
and this current study fail to identify abnormal returns around ITI an-
nouncements with no separation between positive and negative ab-
normal returns.
Further analyses of the factors that explain the variations in the
market’s reaction to ITI announcements can be summarised as follows.
Banking firms have greater market reactions than non-banking firms.
Banks, as part of the financial services industry, tend to be more ag-
gressive with their ITIs. These aggressive investments lead to better
17
The drift from day+2 to day+10 (alternative 1), day+2 to day+30 (al-
ternative 2), day+30 to day+60 (alternative 3) and day+11 to day+60 (al-
ternative 4) are examined.
performance and thus they are valued more by the market. This study
finds that smaller firms create more of a market reaction than larger
firms. This result supports the argument that the information disclosed
by small firms is worth more than that from large firms, because larger
firms are more likely to disclose more information than smaller firms.
Contrary to this study’s prediction, the results show that higher com-
petitive position firms have smaller market reactions than lower com-
petitive position firms. Delays in the actual implementation, labour
shortages, inadequate technical skills, poor planning or technological
unfeasibility [3] may prevent investors from reacting to higher com-
petitive position firms. This study finds that first-time IT adopter firms
produce greater market reactions relative to the later adopters [29].
They supply a greater surprise and benefit as a pioneer, which brings
competitive advantages for them [65–67]. Lastly, this study finds that
the announcement of ERP’s implementation by firms receives a positive
response from investors because of the future benefits of ERP.
To conclude, this study finds strong evidence to support both H1 and
four factors mentioned in H2. The empirical results present deep in-
sights beyond the prior studies’ mixed results, which suggested no
market reactions [10,11] or in contrast showed definite market reac-
tions [1–4] around an ITI’s announcement. This study shows how the
market captures the potential wealth increase or decrease of a firm’s
ITI. Both around and subsequent to the ITI’s announcement cause the
market to react and the variation in those reactions can be explained by
the variations created by the firm being in the banking industry, its size,
a first-time IT adopter and the type of technology. The results of sen-
sitivity analyses indicate that the use of CAR5, one and two lags-leads to
calculate beta and different event windows lead to similar conclusions
as the main analyses.
CRediT authorship contribution statement
Singgih Wijayana: Data curation, Formal analysis, Funding ac-
quisition, Methodology, Project administration, Software,
Visualization, Writing - original draft. Didi Achjari: Conceptualization,
Investigation, Resources, Supervision, Validation, Writing - review &
editing.
Acknowledgements
This study was supported by research grant from Indonesian
Ministry of Research, Technology, and Higher Education for the cate-
gory of University Research Excellence (Contract No. 671/UN1-P.III/
LT/DIT-LIT/2016).

12
S. Wijayana and D. Achjari
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Singgih Wijayana is a senior lecturer and the Head of Accounting Undergraduate
Program at the Faculty of Economics and Business, Gadjah Mada University. He is a
member of the Indonesian Accounting Standards Boards, responsible to set accounting
standards in Indonesia. He also serves as a member of the audit committee for PT TWC
Borobudur, Prambanan, and Ratu Boko. He earned his bachelor and master’s degree in
accounting from Gadjah Mada University. His Ph.D. degree was obtained in 2012 from
the Monash University Australia, majoring in accounting and finance. His research in-
terest is financial reporting quality and capital market research. His research paper has
been published in the tier 1 journals-International Review of Financial Analysis as well as
Management International Review. Recently, his paper has also been accepted for pub-
lication at the International Journal of Accounting. He actively presents his research
paper in international forums. In 2015, he had been invited as a guest speaker at Kwansei
Gakuin University in Hyogo and Aoyama Gakuin University Japan. He received a number
of awards, including Best Paper Award at the SAAA and TAA conferences. He was an
awardee of Deloitte-IAAER Scholar Program 2013–2015, DIKTI-Academic Mobility 2015,
and Fulbright Scholar Program 2017/2018. He was a visiting scholar at the University of
Sydney in 2015, 2016, 2018 and at the University of Dayton-Ohio U.S. during 1
September 2017 – 27 February 2018. Recently, he received the Best Research Publication
Award 2019 under the category of Research Collaboration and the Third Best Faculty
Member Performance Award 2019 under the cluster of Sosio-Humaniora, Gadjah Mada
University.
Didi Achjari is a professor at the Faculty of Economics and Business, Gadjah Mada
University. His degrees are from the Universitas Gadjah Mada (S.E.), the University of
New South Wales (M.Com.) and the Curtin University of Technology (DBA). His current
research interests are on information technology, accounting information system, internet
adoption/diffusion, electronic business and the roles of IT/IS in business strategy. His
articles have appeared in several peer-reviewed scholarly journals such as
Telecommunications Policy, Asian Journal of Business and Accounting, Allied Journal of
Business Research, Journal of Indonesian Economy and Business, The Indonesian Journal of
Accounting Research and Gadjah Mada International Journal of Business. He also authored
many articles published in numerous international conference proceedings.