MARKET REACTIONS TO BUSINESS ANALYTICS ANNOUNCEMENTS

Abstract

This study examines how shareholders view business analytics announcements. Specifically, an event study is conducted by considering the corporate announcements related to the implementation of business analytics systems for publicly traded firms in the United States from 2004 to 2011. Given that current literature examining the value of business analytics to businesses is not extensive, this study adopts the event study methodology to determine the value of business analytics to firms. A framework based on the resource-based view was theorized as a guide to examine resource capabilities that influence shareholder’s perception of the value of implementing business analytics. The results obtained showed evidence that shareholders viewed business analytics to be of value to firms as positive abnormal returns were observed from business analytics announcements. The results also indicated that firms which adopted business analytics systems from vendors that are market leaders obtained a more positive stock market reaction compared to firms which adopted business analytics systems from vendors that are non-market leaders. A further analysis into firm characteristics also found that firms which provided higher compensation for top executives and firms with stronger employee involvement generated higher and more significant abnormal returns when market leading vendors were selected. This study contributes to literature by offering an alternative method for evaluating the value of business analytics to firms. It also generates additional insights for firms and managerial executives on strategies that would help them attain or sustain competitive advantage against competitors.