UGM Research Debunks Myth That Technology Investment Directly Boosts Share Prices
Announcements of information technology investment by publicly listed companies have long been regarded as positive news by market participants. The adoption of enterprise resource planning systems, strengthening of digital infrastructure, and development of technology-based services are often automatically assumed to push share prices higher. However, research findings from Universitas Gadjah Mada (UGM) demonstrate that market reactions are far more complex than this simplistic assumption.
Singgih Wijayana, a lecturer in the Department of Accounting at UGM’s Faculty of Economics and Business, noted that over the past two decades, companies across various countries have competed to invest in the technology sector. Investments have been made through ERP systems, e-commerce platforms, and digital banking with the expectation that efficiency would increase and company value would surge.
According to him, this pattern does not entirely apply in Indonesia because the characteristics of the domestic capital market are different. “Unfortunately, it is not always the case because Indonesia’s capital market has distinct characteristics. Indonesia’s capital market is known as a thin market, where trading activity is not as dense as in developed countries, so information is not always quickly absorbed by investors,” he stated, according to UGM’s official website on Wednesday, 25 February 2026.
Market Does Not React Immediately
Singgih presented research findings he conducted with Professor Didi Achjari titled “Market Reaction to the Announcement of an Information Technology Investment: Evidence from Indonesia.” The study attempted to test how quickly investors responded to technology investment information.
The research analysed 179 technology information investment announcements made by public companies on the Indonesia Stock Exchange between 2001 and 2016. Share movements were observed around the announcement date and up to 60 days afterwards to discern market response patterns.
The methodology was also adapted to thin market conditions, including risk adjustments through the Scholes-Williams and Dimson adjusted beta. “The results showed that there was no significant market reaction around the date of technology investment announcements. This means that investors in Indonesia do not immediately respond to such news,” Singgih said.
The findings explained that investors tend to exercise restraint. They choose to wait several months to see whether technology investments truly impact financial performance.
Despite not triggering instant reactions, the research discovered stronger market responses in certain sectors. Banking companies, small-cap emitters, and companies adopting technology such as ERP for the first time actually received greater attention from investors. According to Singgih, factors including industry type, business scale, and experience in technology use influence how the market values a technology investment announcement.
“This demonstrates that industry type, business scale, and technological experience play an important role in determining how the market values IT investment announcements,” he said.
Communications and Management Public Relations
The findings simultaneously serve as a reminder to company management that technology investment does not automatically increase share valuation. The market requires more concrete explanations regarding the long-term benefits of technology spending.
Management is deemed to need to communicate business direction, efficiency potential, and impact on profitability in a transparent manner so that investors grasp the added value.
“Beyond that, this research demonstrates that Indonesia’s capital market is still in the process of moving towards an efficient market, and investor behaviour is still influenced by psychological factors and limitations in rational decision-making,” Singgih said.
Amid the vigorous push for digital transformation, this research provides distance from the assumption that every technology expenditure always becomes a positive catalyst for share prices. In a market with limited liquidity, timing and clarity of business strategy remain key factors before investors truly react.
Thin Liquidity and Minimal Active Investors
The findings of UGM academics’ research on the slow market reaction to technology investment announcements found strong footing in the current structure of Indonesia’s capital market. On paper, the number of investors continues to surge, daily transaction values also rise, but market depth still leaves room for improvement.
Indonesia Stock Exchange data shows that the average daily transaction value throughout 2025 was in the region of Rp18.07 trillion. In early 2026, the figure increased to approximately Rp32 trillion per day. This increase indicates livelier trading activity compared to previous periods, but still falls far short when compared to developed market bourses with far greater liquidity.
Behind these figures, the market participants’ structure reveals domination by retail investors. Approximately 52 per cent of daily transactions originate from individual investors, whilst foreign investors account for around 30 per cent and the remainder from domestic institutions. This composition causes share price movements to be more influenced by short-term sentiment and psychological factors, so the price formation process that reflects fundamental information proceeds more slowly.
The number of capital market investors has indeed grown rapidly. As of 2025, there were 20.3 million single investor identifications registered, with 8.59 million of those being equity investors. However, this figure drops sharply when viewed from the perspective of actual participation.
Investors who are genuinely active in transactions each month number only around 901,000. Meanwhile, daily active investors stand at around 179,000. This gap between the number of registered investors and those actually active means that market liquidity has not yet formed evenly across all shares.
This condition explains why new information, including technology investment announcements, is not immediately reflected in prices. The market requires longer because the number of participants who actually transact is limited.
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