PRICED BUT NOT PRODUCTIVE? DIGITAL-TRANSFORMATION DISCLOSURE, CEO POWER AND FIRM VALUE
DOI:
https://doi.org/10.69980/pnghq507Keywords:
digital transformation, firm value, Tobin's q, operating performance, CEO power, CEO duality, corporate disclosureAbstract
Investors reward firms that describe themselves as digital, but it is unclear whether the reward reflects operating gains. This study replicates and extends recent evidence on the valuation of digital disclosure by asking whether it is matched by operating performance, whether it reflects persistent firm differences or within-firm change, whether chief executive officer (CEO) power conditions it, and whether it is driven by frontier technology language such as artificial intelligence. Using 388 non-financial S&P 500 firms over fiscal years 2015–2024 (3,645 firm-years), we measure digital-transformation disclosure intensity in the business section of each 10-K and relate it to Tobin's q, return on assets, operating margin and asset turnover. Market value is measured from year-end share prices and shares outstanding. In pre-specified within-firm models, changes in disclosure are not associated with any outcome (Tobin's q: b = −0.0008, p = .920), and CEO duality, CEO tenure and science-based climate commitments do not moderate the relationship. Across firms in the same sector and year, more digitally oriented firms trade at higher valuations (b = 0.0206, p = .015; about 8% of mean q per standard deviation) without higher overall profitability or efficiency, and a between–within decomposition shows that the premium arises between firms rather than within them (difference p =.045). Contrary to concerns about technology hype, the valuation premium is not concentrated in frontier terms, and firms using frontier language are, if anything, more profitable and efficient. The results indicate that markets price digital orientation as a firm attribute rather than rewarding firms for becoming more digital, and they caution against treating changes in digital narratives as evidence of operating improvement.
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