Information Systems Outsourcing Announcements: Investigating the Impact on the Market Value of Contract-Granting Firms
- 1 September 2000
- journal article
- Published by American Accounting Association in Journal of Information Systems
- Vol. 14 (2), 109-125
- https://doi.org/10.2308/jis.2000.14.2.109
Abstract
The objective of this research project is to examine the impact of information systems (IS) outsourcing announcements on the market value of contract-granting firms. This study is important to researchers, professionals, and policy makers as it provides empirical evidence from the capital market that outsourcing is considered to be a value-added business exchange for contract-granting firms. Research findings indicate positive and significant market value gains for smaller vs. larger firms and service vs. nonservice industry firms. The significant effects observed in this study are explained by the existence of information asymmetry in the capital market for smaller firms and service firms, and by the relatively higher investment made by service firms in information technology. This study contributes to accounting research by examining the importance of providing financial report users with nonfinancial forward-looking information concerning management's strategic decisions, such as the decision to outsource IS functions. Additionally, the current study complements and extends extant IS outsourcing research, as it integrates efficient market and capital market theory into ongoing investigations aimed at identifying the underlying determinants of IS outsourcing decisions.Keywords
This publication has 15 references indexed in Scilit:
- Value-relevance of nonfinancial information: The wireless communications industryJournal of Accounting and Economics, 1996
- The Impact of Information Technology Investment Announcements on the Market Value of the FirmInformation Systems Research, 1993
- Business‐to‐business Service Marketing: HOW DOES IT DIFFER FROM BUSINESS‐TO‐BUSINESS PRODUCT MARKETING?Journal of Business & Industrial Marketing, 1993
- Efficient Capital Markets: IIThe Journal of Finance, 1991
- On the Usefulness of Earnings and Earnings Research: Lessons and Directions from Two Decades of Empirical ResearchJournal of Accounting Research, 1989
- Technical change, competition and vertical integrationStrategic Management Journal, 1986
- Asymmetric Information and Risky Debt Maturity ChoiceThe Journal of Finance, 1986
- Predisclosure Information, Firm Capitalization, and Security Price Behavior Around Earnings AnnouncementsJournal of Accounting Research, 1985
- Regression DiagnosticsWiley Series in Probability and Statistics, 1980
- Market Implications of Differential Amounts of Interim InformationJournal of Accounting Research, 1980