Going Digital: Implications for Firm Value and Performance

Wilbur  Chen; Suraj  Srinivasan

Working Paper | HBS Working Paper Series | 2020

Going Digital: Implications for Firm Value and Performance

Abstract

We examine firm value and performance implications of the growing trend of non-technology companies adopting digital technologies, using a measure based on the disclosure of digital words in 10-Ks and conference calls. Digital adoption is associated with a market-to-book ratio 7% to 23% higher than industry peers. Portfolios formed on digital disclosure earn a DGTW-adjusted return of 21% over a 3-year horizon and a monthly alpha of 49 basis points. While there is no improvement in overall performance as measured by return-on-assets conditional on digital activities, there is a significant increase in asset turnover but also a significant decline in margins and sales growth.

Keywords: digital technologies; Business Ventures; Technology Adoption; Valuation; Performance; Management; Experience and Expertise;

Language: English

Format: Print

55 pages

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Citation:

Chen, Wilbur, and Suraj Srinivasan. "Going Digital: Implications for Firm Value and Performance." Harvard Business School Working Paper, No. 19-117, May 2019. (Revised April 2020.)

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Going Digital: Implications for Firm Value and Performance

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