Investment in information technology by publicly listed companies is often regarded as a positive signal for the stock market. Announcements related to the adoption of enterprise resource planning (ERP) systems, strengthening digital infrastructure, or the development of information technology (IT) are commonly assumed to immediately boost share prices.
However, a study conducted by researchers from the Faculty of Economics and Business Universitas Gadjah Mada (FEB UGM) shows that this assumption does not necessarily apply to the Indonesian capital market.
Lecturer at the Department of Accounting, FEB UGM, Singgih Wijayana, S.E., M.Si., Ph.D., explained that over the past two decades, companies worldwide have been competing to invest in information technology, ranging from ERP systems and e-commerce platforms to digital banking services. IT investments are generally believed to enhance efficiency and firm value. Nevertheless, the Indonesian capital market has distinct characteristics.
“The Indonesian capital market is known as a thin market, where trading activity is not as intensive as in developed countries, so information is not always absorbed quickly by investors,” he explained.
Singgih shared these insights during the Research Series program, which was recently aired on the YouTube channel @fakultasekonomikadanbisnisugm. In the program, he presented research findings conducted jointly with Prof. Dr. Didi Achjari, M.Com. Ak, CA., entitled “Market Reaction to the Announcement of an Information Technology Investment: Evidence from Indonesia.”
Through this study, the researchers examined how the Indonesian stock market responds to information related to technology investments, whether the market reacts quickly or requires a longer time to process such information.
Previous studies in Indonesia had explored similar topics but failed to identify significant market reactions to IT investment announcements. Limitations in observation periods and narrow event windows became gaps that this study sought to address. This research extends the observation period to capture long-term market reactions. It applies methodologies more suitable for thin markets, including risk adjustments using the Scholes–Williams and Dimson adjusted beta models.
The study analyzed 179 IT investment announcements made by publicly listed companies on the Indonesia Stock Exchange between 2001 and 2016. To identify patterns in investor responses, stock price movements were examined prior to and up to 60 days after the announcement dates.
“The results show no significant market reaction around the announcement date of technology investments. This indicates that Indonesian investors do not respond immediately to such news,” Singgih explained.
Instead, investors tend to wait and observe developments in the months following the announcement to better understand the actual impact of IT investments on company performance. This cautious approach reflects the reality that technology investments do not always generate immediate positive effects on financial performance.
The study also found that market reactions tend to be stronger for banking firms, smaller companies, and firms adopting technologies such as ERP for the first time. These findings suggest that industry type, firm size, and prior technological experience play essential roles in shaping how the market evaluates IT investment announcements.
“These findings provide insight that technology investment announcements do not automatically increase stock value. Management needs to communicate the long-term business benefits of technology investments clearly and transparently so that the market can recognize their added value,” Singgih stated.
Furthermore, Singgih emphasized that the results serve as a reminder that not all technology investments deliver immediate impacts. The market needs time to assess whether such investments truly enhance efficiency and profitability. The study also indicates that the Indonesian capital market is still progressing toward greater efficiency, while investor behavior remains influenced by psychological factors and limitations in rational decision-making.
The full Research Series video can be accessed at:
Research Series : Apakah Pasar Saham Langsung Bereaksi Saat Perusahaan Umumkan Investasi Teknologi?
Reported by: Shofi Hawa Anjani
Editor: Kurnia Ekaptiningrum
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