This study applies the event study method, a method to measure how a firm’s stock price reacts to new information, to a list of publicly traded Australian firms, to investigate the impact of information and communication technology investments on the market value of the firm. We select 217 announcements relating to IT investments over a period from 1996 to 2006. Positive abnormal returns are observed on the announcement day of each of three distinct time periods; during the technology bubble (1996 to 1999), during the Year 2000 bug (Y2K bug) period (2000 - 2001), as well as the period afterwards that ensued to 2006. These are all statistically significant. We also find similar results when categorizing announcing firms into two broad industry groups; IT firms and non-IT firms. We value-weigh each announcement based on firm size and find that the market’s assessment of the returns to IT investments is more favorable towards smaller firms than larger firms for the whole sample, across all periods and the two industry groups. On a whole, the research shows that IT investment announcements over the whole sampled periods yield statistically significant positive abnormal returns. This is valid for the announcement day, and over two event windows; the first one comprising the day before to the day after the announcement, and the second one encompassing the period 5 days before to 5 days after the announcement was made. These results are of practical relevance for the particular Australian market under investigation given the comparatively high levels of spending on IT in Australia in relation to other OECD countries.
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