Stock Market Valuation of IT Implementations: An Empirical Study of Mobile App Investments
38 Pages Posted: 8 Mar 2019 Last revised: 30 Jan 2023
Date Written: January 2023
Abstract
Considerable research has examined the impact of IT-related investments on firm value by studying the stock market reaction to such announcements. Due to the unavailability of data on implementation dates, few studies evaluate the stock market reaction to the actual IT implementations. Leveraging a novel dataset in the mobile app market, we investigate the impact of IT implementation on firm value with a sample of 761 public firms that released their first mobile app between 2008 and 2017 on Apple’s App Store and Google Play. We find that, on average, these firms experience a negative abnormal stock return on the day they release their first mobile app, and the value creation process is highly contingent on a firm’s disclosure behavior, market position, IT capabilities, and entry time. Additional analyses to test several alternative explanations show that the negative impact is mainly due to the technology immaturity.
Keywords: mobile app, IT investment, abnormal returns, firm value, business value of IT, event study
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