Risk and return of IT investment: evidence from SCM and CRM announcements

Measuring the effect of investment announcements on a firm's stock performance has become an important method in research on IT/IS business value, especially in the discussion of the consequent changes in corporate risk-return relationship. This paper selects the announcements made by US listed companies that implemented supply chain management (SCM) and customer relationship management (CRM) from 2000 to 2008. By testing the stock performance with event study method, and comparing the differences between sample and control groups, we find that; 1) during the event window, SCM and CRM announcements can bring some degree of risk-adjusted abnormal return, but the return effect is unstable across the years observed; 2) in the long run, there is no abnormal return from SCM and CRM investments; 3) in the long term, SCM and CRM investments do not increase the systematic and unsystematic risk of the companies; 4) some moderating factors may affect the risk and return of SCM and CRM announcements. Our results enrich research on the effect of IT investments on company performance, and contribute to the stream of event studies in IT business value.