From IT investment to firm market value

The mediating role of stock analysts' recommendation

Xueming Luo, Bin Gu, Cheng Zhang

Research output: Chapter in Book/Report/Conference proceedingConference contribution

1 Citation (Scopus)

Abstract

This study provides a new perspective to the long-standing debate on the business value of IT. Advancing prior research on the internal perspectives of IT value creation, we take an external view and investigate the role of stock analysts in facilitating the market evaluation of firms' IT investments. Stock analysts collect information about firms' IT investments and provide informed recommendations to investors in the financial market. As IT investments are known for their complexity and inherent risks, stock analysts can reduce information asymmetry between the firm and investors in the financial markets, thus helping discovering the business value of IT investments. On the basis of Fortune 1000 firms between 1996 and 2007, our analysis suggests that stock analysts play an intricate mediating role in the stock market evaluation of IT investments. Analyst recommendations have a strong mediating role in the effects of enterprise IT systems (ERP and CRM) on firm market value, but a weak to 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 analyst recommendations play a critical role in the stock market valuation of firms' IT investments in situations where the value of such investments is difficult to assess.

Original languageEnglish (US)
Title of host publicationProceedings - Pacific Asia Conference on Information Systems, PACIS 2014
PublisherPacific Asia Conference on Information Systems
StatePublished - 2014
Event18th Pacific Asia Conference on Information Systems, PACIS 2014 - Chengdu, China
Duration: Jun 24 2014Jun 28 2014

Other

Other18th Pacific Asia Conference on Information Systems, PACIS 2014
CountryChina
CityChengdu
Period6/24/146/28/14

Fingerprint

Industry
Enterprise resource planning
Financial markets

Keywords

  • IT investment
  • Market value
  • Stock analyst

ASJC Scopus subject areas

  • Information Systems

Cite this

Luo, X., Gu, B., & Zhang, C. (2014). From IT investment to firm market value: The mediating role of stock analysts' recommendation. In Proceedings - Pacific Asia Conference on Information Systems, PACIS 2014 Pacific Asia Conference on Information Systems.

From IT investment to firm market value : The mediating role of stock analysts' recommendation. / Luo, Xueming; Gu, Bin; Zhang, Cheng.

Proceedings - Pacific Asia Conference on Information Systems, PACIS 2014. Pacific Asia Conference on Information Systems, 2014.

Research output: Chapter in Book/Report/Conference proceedingConference contribution

Luo, X, Gu, B & Zhang, C 2014, From IT investment to firm market value: The mediating role of stock analysts' recommendation. in Proceedings - Pacific Asia Conference on Information Systems, PACIS 2014. Pacific Asia Conference on Information Systems, 18th Pacific Asia Conference on Information Systems, PACIS 2014, Chengdu, China, 6/24/14.
Luo X, Gu B, Zhang C. From IT investment to firm market value: The mediating role of stock analysts' recommendation. In Proceedings - Pacific Asia Conference on Information Systems, PACIS 2014. Pacific Asia Conference on Information Systems. 2014
Luo, Xueming ; Gu, Bin ; Zhang, Cheng. / From IT investment to firm market value : The mediating role of stock analysts' recommendation. Proceedings - Pacific Asia Conference on Information Systems, PACIS 2014. Pacific Asia Conference on Information Systems, 2014.
@inproceedings{e87e0ca603fc40f5b47c3bc0323bd433,
title = "From IT investment to firm market value: The mediating role of stock analysts' recommendation",
abstract = "This study provides a new perspective to the long-standing debate on the business value of IT. Advancing prior research on the internal perspectives of IT value creation, we take an external view and investigate the role of stock analysts in facilitating the market evaluation of firms' IT investments. Stock analysts collect information about firms' IT investments and provide informed recommendations to investors in the financial market. As IT investments are known for their complexity and inherent risks, stock analysts can reduce information asymmetry between the firm and investors in the financial markets, thus helping discovering the business value of IT investments. On the basis of Fortune 1000 firms between 1996 and 2007, our analysis suggests that stock analysts play an intricate mediating role in the stock market evaluation of IT investments. Analyst recommendations have a strong mediating role in the effects of enterprise IT systems (ERP and CRM) on firm market value, but a weak to 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 analyst recommendations play a critical role in the stock market valuation of firms' IT investments in situations where the value of such investments is difficult to assess.",
keywords = "IT investment, Market value, Stock analyst",
author = "Xueming Luo and Bin Gu and Cheng Zhang",
year = "2014",
language = "English (US)",
booktitle = "Proceedings - Pacific Asia Conference on Information Systems, PACIS 2014",
publisher = "Pacific Asia Conference on Information Systems",

}

TY - GEN

T1 - From IT investment to firm market value

T2 - The mediating role of stock analysts' recommendation

AU - Luo, Xueming

AU - Gu, Bin

AU - Zhang, Cheng

PY - 2014

Y1 - 2014

N2 - This study provides a new perspective to the long-standing debate on the business value of IT. Advancing prior research on the internal perspectives of IT value creation, we take an external view and investigate the role of stock analysts in facilitating the market evaluation of firms' IT investments. Stock analysts collect information about firms' IT investments and provide informed recommendations to investors in the financial market. As IT investments are known for their complexity and inherent risks, stock analysts can reduce information asymmetry between the firm and investors in the financial markets, thus helping discovering the business value of IT investments. On the basis of Fortune 1000 firms between 1996 and 2007, our analysis suggests that stock analysts play an intricate mediating role in the stock market evaluation of IT investments. Analyst recommendations have a strong mediating role in the effects of enterprise IT systems (ERP and CRM) on firm market value, but a weak to 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 analyst recommendations play a critical role in the stock market valuation of firms' IT investments in situations where the value of such investments is difficult to assess.

AB - This study provides a new perspective to the long-standing debate on the business value of IT. Advancing prior research on the internal perspectives of IT value creation, we take an external view and investigate the role of stock analysts in facilitating the market evaluation of firms' IT investments. Stock analysts collect information about firms' IT investments and provide informed recommendations to investors in the financial market. As IT investments are known for their complexity and inherent risks, stock analysts can reduce information asymmetry between the firm and investors in the financial markets, thus helping discovering the business value of IT investments. On the basis of Fortune 1000 firms between 1996 and 2007, our analysis suggests that stock analysts play an intricate mediating role in the stock market evaluation of IT investments. Analyst recommendations have a strong mediating role in the effects of enterprise IT systems (ERP and CRM) on firm market value, but a weak to 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 analyst recommendations play a critical role in the stock market valuation of firms' IT investments in situations where the value of such investments is difficult to assess.

KW - IT investment

KW - Market value

KW - Stock analyst

UR - http://www.scopus.com/inward/record.url?scp=84928642650&partnerID=8YFLogxK

UR - http://www.scopus.com/inward/citedby.url?scp=84928642650&partnerID=8YFLogxK

M3 - Conference contribution

BT - Proceedings - Pacific Asia Conference on Information Systems, PACIS 2014

PB - Pacific Asia Conference on Information Systems

ER -