The Impact of Radio Frequency Identification (RFID) Investment Announcements on the Market Value of the Firm

This paper examines the impact of RFID investment announcements on the market value of the firms and explores industry effects of the positive abnormal returns to firms making the announcements. Drawing upon the efficient market theory, market signaling hypothesis, and prior empirical studies, we employ event study methodology to analyze RFID investment announcements over a six-year period from 2001 to 2006. In this paper, we present preliminary results that demonstrate an overall positive abnormal return to RFID investment announcements over the three-day event window. In addition, industry differences in market returns to RFID investment announcements are observed with a greater return realized in the manufacturing sector and specifically in the information technology industry segment and for technology vendors’ investment initiatives. These preliminary findings provide useful implications for a better understanding of the benefits of RFID adoption and for making decisions in RFID investment and adoption to create value for the firms.