Information Technology Capability: Firm Valuation, Earnings Uncertainty, and Forecast Accuracy

2007 ◽  
Vol 21 (2) ◽  
pp. 27-48 ◽  
Author(s):  
Li Wang ◽  
Pervaiz Alam
Keyword(s):  
Information Technology ◽  
Intangible Assets ◽  
Explanatory Power ◽  
Forecast Accuracy ◽  
Firm Valuation ◽  
Organizational Resources ◽  
Implementation Challenges ◽  
Current Accounting ◽  
It Capability ◽  
Earnings Uncertainty

Prior literature argues that information technology (IT) capability, an organization's ability to effectively use IT-based resources in combination with other organizational resources, can create unique and sustainable competitive advantages and thus intangible assets for a company. However, current accounting rules do not allow the capitalization of IT-enabled intangible assets. We hypothesize that IT-enabled intangible assets are value-relevant and provide incremental explanatory power for firm valuation beyond traditional accounting information. IT capability is inherently risky as it is subject to implementation challenges, technological complexity, and innovative integration of IT investments with other organizational resources. Thus, we argue that IT capability is positively associated with future earnings uncertainty and decreased analyst forecast accuracy. Using InformationWeek 500 ranking index as a proxy for IT capability, we find evidence supporting these hypotheses. This study contributes to the growing literature on IT capability.

A Resource-Based Perspective on Information Technology, Knowledge Management, and Firm Performance

2010 ◽  
pp. 296-310 ◽  
Author(s):  
Clyde W. Holsapple ◽  
Jiming Wu
Keyword(s):  
Information Technology ◽  
Knowledge Management ◽  
Firm Performance ◽  
Organizational Resources ◽  
Resource Based View ◽  
Technology Knowledge ◽  
It Capability ◽  
Order Variable ◽  
The Relationship ◽  
Firm Attributes

The resource-based view of the firm attributes superior firm performance to organizational resources that are valuable, rare, non-substitutable, and difficult to imitate. Aligned with this view, the authors contend that both information technology (IT) and knowledge management (KM) comprise critical organizational resources that contribute to superior firm performance. The authors also examine the relationship between IT and KM, and develop a new second-order variable – IT-KM competence – with IT capability and KM performance as its formative indicators. Thus, this chapter contributes not only by investigating the determinants of firm performance but also by broadening our understanding of the relationships among IT, KM, and firm performance.

scholarly journals Marketing assets: Relating brand equity and customer equity

2016 ◽  
Vol 12 (2) ◽  
pp. 591 ◽  
Author(s):  
Jaime Romero ◽  
María J. Yagüe
Keyword(s):  
Brand Equity ◽  
Goodness Of Fit ◽  
Brand Management ◽  
Intangible Assets ◽  
Explanatory Power ◽  
Structural Equations ◽  
Firm Valuation ◽  
Customer Equity ◽  
Marketing Activities ◽  
The Relationship

Purpose: Brand equity and customer equity are inextricably linked. Some authors propose that marketing activities build these intangible assets simultaneously. In contrast, others suggest that brand equity is an antecedent of customer equity. In this research, we aim to shed light about the relationship between brand equity and customer equity, by empirically testing these two alternative explanations. Design/methodology/approach: We propose four research models that reflect these two alternatives explanations regarding the link between brand equity and customer equity. In order to estimate these models we employ Structural Equations Modelling. We measure model variables using data collected through a survey to marketing managers of services companies that operate in Spain. We compare these four research models in terms of explanatory power and goodness of fit. Findings: Our results indicate that the models that correspond to the simultaneity approach have a higher explanatory power and goodness of fit than the models that suggest that brand equity is an antecedent of customer equity, thus supporting that these intangible assets are built by marketing activities at the same time. Research limitations/implications: Our results recommend caution when interpreting previous research about the effects of brand (customer) equity, as they might indeed correspond to customer (brand) management. Similarly, future research focusing on customer and brand management need to take into account both managerial areas in their studies. Practical implications: From a practitioners’ point of view, our findings suggest adopting a brand-customer portfolio approach to enhance company profitability. Similarly, we derive implications for firm valuation processes, which incorporate brand equity and customer equity in their calculations. Originality/value: We empirically study the relationship between brand equity and customer equity, while previous research has analyzed this topic only at a theoretical level. Clarifying this link enriches our comprehension about how companies build these marketing intangible assets and increases the accuracy of firm valuation processes.

A Resource-Based Perspective on Information Technology, Knowledge Management, and Firm Performance

2010 ◽  
pp. 1706-1720
Author(s):  
Clyde W. Holsapple ◽  
Jiming Wu
Keyword(s):  
Information Technology ◽  
Knowledge Management ◽  
Firm Performance ◽  
Organizational Resources ◽  
Resource Based View ◽  
Technology Knowledge ◽  
It Capability ◽  
Order Variable ◽  
The Relationship ◽  
Firm Attributes

The resource-based view of the firm attributes superior firm performance to organizational resources that are valuable, rare, non-substitutable, and difficult to imitate. Aligned with this view, the authors contend that both information technology (IT) and knowledge management (KM) comprise critical organizational resources that contribute to superior firm performance. The authors also examine the relationship between IT and KM, and develop a new second-order variable – IT-KM competence – with IT capability and KM performance as its formative indicators. Thus, this chapter contributes not only by investigating the determinants of firm performance but also by broadening our understanding of the relationships among IT, KM, and firm performance.

A Resource-Based Perspective on Information Technology, Knowledge Management, and Firm Performance

2011 ◽  
pp. 1099-1112
Author(s):  
Clyde W. Holsapple ◽  
Jiming Wu
Keyword(s):  
Information Technology ◽  
Knowledge Management ◽  
Firm Performance ◽  
Organizational Resources ◽  
Resource Based View ◽  
Technology Knowledge ◽  
It Capability ◽  
Order Variable ◽  
The Relationship ◽  
Firm Attributes

The resource-based view of the firm attributes superior firm performance to organizational resources that are valuable, rare, non-substitutable, and difficult to imitate. Aligned with this view, the authors contend that both information technology (IT) and knowledge management (KM) comprise critical organizational resources that contribute to superior firm performance. The authors also examine the relationship between IT and KM, and develop a new second-order variable – IT-KM competence – with IT capability and KM performance as its formative indicators. Thus, this chapter contributes not only by investigating the determinants of firm performance but also by broadening our understanding of the relationships among IT, KM, and firm performance.

The Effect of Underreaction and Overreaction of Firm Stocks to Firm Valuation: Data from the Indonesian Stock Exchange

2019 ◽  
Author(s):  
Yohanes Indrayono
Keyword(s):  
Behavioral Finance ◽  
Firm Value ◽  
Intangible Assets ◽  
Stock Exchange ◽  
Investor Sentiment ◽  
Firm Valuation ◽  
Good News ◽  
Industrial Sectors ◽  
Tangible Assets ◽  
Firm Profitability

<p>This study contributes to the on-going studies on behavioral finance by providing a case study on underreaction and overreaction of firm stocks to firm valuation. We use the Model of Investor Sentiment (Barberis et al., 2005) to evaluate underreaction and overreaction behavior and reflect on specific findings in the Indonesian market. The result of the study is most of the stocks in the Indonesian Stock Exchange are more overreaction to the news of firm financial statements. Firms on the industry with more intangible assets measure more overreaction than firms on industries with more tangible assets. For stocks with overreaction, the stock firm value is positively affected by a change in the total assets and profitability, but not by change of book value. The result concretized no evidence that firm stocks overreacted to the news more than underreacting. In stock industrial sectors, the financial institutions and wholesale industry stocks demonstrated remarkable overreactions. Nonetheless, automotive, building construction, food and beverage as well as cement evidenced more underreaction. For better return in financial markets, investors may buy stocks of the firm on industry with more tangible assets when there is no good news about the increasing firm profitability and sales; nonetheless, they should buy stocks of the firm on industry with more intangible assets when there is no lousy news about the increasing firm profitability and sales. </p>

Information Technology Capability, Management Forecast Accuracy, and Analyst Forecast Revisions

2018 ◽  
Vol 32 (3) ◽  
pp. 49-70 ◽  
Author(s):  
Feiqi Huang ◽  
He Li ◽  
Tawei Wang
Keyword(s):  
Forecast Accuracy ◽  
Analyst Forecast ◽  
Management Forecasts ◽  
Forecast Revisions ◽  
It Capability ◽  
Management Forecast ◽  
Prior Literature ◽  
Technology Capability ◽  
Information Technology Capability ◽  
The Relationship

SYNOPSISPrior literature has firmly established the relationship between IT capability and firm performance. In this paper, we extend the research in this field and investigate (1) whether IT capability contributes to management forecast accuracy, and (2) whether IT capability improves the informativeness of management forecasts and enhances the extent to which analysts incorporate management forecasts in their revisions. Using firms listed on InformationWeek 500 as our high IT capability group, we empirically demonstrate that firms with high IT capability are able to increase management forecast accuracy, and that analysts incorporate more information from management forecasts in their revisions if the firm has high IT capability.

scholarly journals Managing and Delivering Information Technology Value

2011 ◽  
Vol 2 (1) ◽  
pp. 72
Author(s):  
Yuliana Lisanti
Keyword(s):  
Information Technology ◽  
Value Creation ◽  
Business Strategy ◽  
Primary Objective ◽  
Business Value ◽  
It Strategy ◽  
Value Innovation ◽  
Capability Maturity ◽  
It Capability ◽  
It Organization

Investment Information Technology (IT) has always been a primary objective of the business which is expected to provide value to businesses through its role as a competitive advantage and the creation of innovation. However, it is ot easy to measure how much value is successfully created, or determine whether the IT strategy is aligned with business strategy, or find out if the IT organization has a strategy that focuses on creating business value. Innovation Value of Institute (IVI) introduces a new concept known as the IT Capability Maturity Framework (IT-CMF) which can help IT organizations to align the business vision with the IT vision so that IT strategy could focus on value creation . the IT-CMF implementation which begins with the assessment of the maturity of IT organization can provide an overall picture, so that organization can prioritize the development of appropriate IT investments to support the value creation for the overall business. 

scholarly journals FINANCIAL PERFORMANCE, INTANGIBLE ASSETS AND VALUE CREATION IN BRAZILIAN AND CHILEAN INFORMATION TECHNOLOGY COMPANIES.

2015 ◽  
Vol 23 (4) ◽  
Author(s):  
TÀNIA CRISTINA CHIARELLO ◽  
CAROLINE SULZBACH PLETSCH ◽  
ALINI DA SILVA ◽  
TARCISIO PEDRO DA SILVA
Keyword(s):  
Information Technology ◽  
Financial Performance ◽  
Value Creation ◽  
Intangible Assets ◽  
T Test ◽  
Descriptive Statistics ◽  
Quantitative Approach ◽  
Statistics Analysis ◽  
Pearson's Correlation ◽  
Information Technology Companies

Intangible assets disclosure, even with recent obligation, has brought benefits to companiesvalue and financial performance assistance. This study aims at analyzing the relationshipbetween financial performance, intangible assets disclosure and value creation withinBrazilian and Chilean information technology companies. In order to carry out the survey adescriptive analysis through both documentary research and quantitative approach wasused. Descriptive statistics analysis, t-test and Pearson's correlation helped confirm thatChilean companies disclose more intangible assets and make greater value through reachinggood results in financial performance. Thus, the higher the financial performance, the greaterthe value creation, and the greater the intangible assets disclosure within Chileaninformation technology companies.

The Usefulness of Disclosures of Untaxed Foreign Earnings in Firm Valuation

2008 ◽  
Vol 30 (2) ◽  
pp. 53-77 ◽  
Author(s):  
Mark P. Bauman ◽  
Kenneth W. Shaw
Keyword(s):  
Firm Valuation ◽  
Foreign Subsidiaries ◽  
Share Prices ◽  
Current Accounting ◽  
Foreign Earnings ◽  
Tax Effects ◽  
Downward Bias ◽  
Accounting Rules ◽  
Repatriation Taxes

ABSTRACT: Under current accounting rules, U.S. multinationals are not required to record liabilities for future taxes on earnings of foreign subsidiaries, as long as those earnings are deemed to be indefinitely reinvested in those subsidiaries. These rules allow considerable flexibility in the designation of earnings deemed permanently reinvested and the reporting of expected repatriation taxes thereon. Some firms disclose amounts for unrecorded taxes on permanently reinvested earnings, but most do not. We show that while estimated repatriation taxes are relevant in explaining share prices of non-disclosing firms, they are less relevant than firm-disclosed amounts are in explaining share prices of disclosing firms. This result is due to estimated repatriation tax amounts exhibiting downward bias, and less accuracy for actual repatriation tax effects, relative to firm-disclosed repatriation tax amounts. We propose new disclosures designed to improve the relevance of estimated repatriation tax amounts.

Transfer of Information Technology to the Arab World

2011 ◽  
pp. 141-172 ◽  
Author(s):  
Detmar W. Straub ◽  
Karen D. Loch ◽  
Carole E. Hill
Keyword(s):  
Information Technology ◽  
Arab World ◽  
Strong Predictor ◽  
Cultural Beliefs ◽  
Explanatory Power ◽  
Cultural Influence ◽  
Primary Data ◽  
Influence Model ◽  
Beliefs And Values ◽  
Research Questions

The complex societal beliefs and values of the Arab world provide a rich setting to examine the hypothesized influence of culture on information technology transfer (ITT). Two research questions arise in this context: (1) Do cultural beliefs and values affect the transference of information technology in the Arab world? and (2) Does contact with technologically advanced societies impact ITT and systems outcomes? The present study addresses these research questions by conceptualizing and testing a cultural influence model of ITT. In this model, cultural beliefs and values are one major construct while a counterbalancing variable is the external influence of technologically advanced societies. These constructs along with the variable “national IT development” form the conceptual basis for the model. This study is the second part of a program of research investigating ITT. The setting of the study was Arab society, which allowed us to test our “cultural influence” model in, perhaps, one of the more complex cultural and social systems in the world. The program of research took place in several phases. In the early phases, Arab-American businessmen and women as well as Arabs studying in American universities were studied. In the latter phases, the cross-disciplinary research team gathered primary data in the Arab cultures of Jordan, Egypt, Saudi Arabia, Lebanon, and the Sudan. Both quantitative and qualitative techniques were used to explore the phenomenon of ITT. This paper reports quantitative findings from the latter phase. Findings suggest that the model has explanatory power. Arab cultural beliefs were a very strong predictor of resistance to systems and thus ITT; technological culturation was also a factor. These results have implications for future theory-testing and for technology policy-setting by responsible Arab leaders. Additionally, there are implications for transnational firms and managers charged with introducing IT in foreign ports, subsidiaries, offices, and plants.

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