NDLI: IT Investments and Firm Stock Market Value: The Mediating Role of Stock Analysts

Content Provider	IEEE Xplore Digital Library
Author	Xueming Luo Bin Gu Cheng Zhang
Copyright Year	2014
Description	Author affiliation: Temple Univ., Philadelphia, PA, USA (Xueming Luo) \|\| Fudan Univ., Shanghai, China (Cheng Zhang) \|\| Arizona State Univ., Tempe, AZ, USA (Bin Gu)
Abstract	This study provides a new perspective to the long-standing debate on the business value of IT. Prior research on IT value takes an internal perspective - focusing on business processes and complementary resources that help create value form IT investments. In this study, we take an external perspective - focusing on the value discovery role of stock analysts. Stock analysts collect information about firms' IT investments and provide informed recommendations to investors in the financial market. Research in finance has long shown that stock analysts can reduce information asymmetry between the firm and investors. However, despite that IT investments are known for their complexity and inherent risks, little is known about the role of stock analysts in helping the financial market understand firms' investments in IT. We address this question empirically using IT assets and firm performance data of Fortune 1000 firms between 1996 and 2007. Our empirical evidence suggests that stock analysts play an intricate mediating role in the stock market evaluation of IT investments. Analyst recommendations have a stronger mediating role in the effects of enterprise IT systems (ERP and CRM) on firm market value, but a weaker and insignificant mediating role in the effects of function IT systems (DSS, HR and AIS). In addition, we find that the mediating role of financial analysts for IT investments is more salient when the firm's market environments are more uncertain and unpredictable. These findings suggest that financial analysts play a critical role in the market valuation of firms' IT investments.
Sponsorship	IEEE Comput. Soc.
Starting Page	4093
Ending Page	4102
File Size	216926
Page Count	10
File Format	PDF
ISBN	9781479925049
DOI	10.1109/HICSS.2014.505
Language	English
Publisher	Institute of Electrical and Electronics Engineers, Inc. (IEEE)
Publisher Date	2014-01-06
Publisher Place	USA
Access Restriction	Subscribed
Rights Holder	Institute of Electrical and Electronics Engineers, Inc. (IEEE)
Subject Keyword	Investment Customer relationship management Stock markets Decision support systems Cost accounting Finance
Content Type	Text
Resource Type	Article

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