Does Media Exposure of Firm IT Practices Matter To Firm Market Value?

Extant literature on information technology business value has proposed firm market value as a better measure than traditional firm performance measures, such as return on investment (ROI). Interestingly, however, it solely focuses on the tangible effects of IT investments and overlooks a simple fact that firm market value is a type of perceived performance, which is significantly influenced by intangible effects of firm IT practices (such as IT investments, changes of IT leadership, and reports of IT implementation) on attitude of investors towards and reputation of the focal firm. In this study we extend existing research by focusing on IT media exposure, defined as the extent to which firm IT practices are reported by media within a prescribed period, and argue that IT media exposure is positively related to firm market value. We suggest that this is because IT media exposure can facilitate three mechanisms – improving attitude of investors, building firm reputation and signaling firm IT capability. To test our conjecture, we collected data of 26 companies among S&P 500 under the health care section over a period of 1991-2012 (22 years) and conducted a multilevel analysis (MLM). The results of data analysis support our hypothesis.