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Digitalization and the performance of non-technological firms: Evidence from the COVID-19 and natural disaster shocks

Year: 2024

Type: article

Abstract: Over the last decades, firms have been incorporating digital technologies into their operations, a process known as digitalization. Nevertheless, understanding the link between digitalization and firm performance remains challenging. We propose a new firm-level measure of digital intensity based on textual analysis of business descriptions and quarterly earnings calls. To overcome endogeneity, we use two quasi-natural experiments: the COVID-19 pandemic and shocks involving suppliers affected by U.S. natural disasters. Non-technological firms with higher pre-shock digital intensity experience higher abnormal returns, higher profitability, and higher revenue growth during the shocks. The supply chain is one of the areas through which digitalization contributes to significantly mitigate the effects of these shocks, thereby enhancing firm resilience.

Source: Journal of Corporate Finance

DOI: 10.1016/j.jcorpfin.2024.102670

Authors: José-Miguel Gaspar, Sumingyue Wang, Liang Xu

Institutions: École Supérieure des Sciences Économiques et Commerciales, Shanghai University of Finance and Economics, SKEMA Business School

Language: English

Topic: Digital Economy and Transformation

Subfield: Strategy and Management

Field: Business, Management and Accounting

Domain: Social Sciences

SDGs: Industry, innovation and infrastructure, Decent work and economic growth

Open Access status: hybrid

Estimated APC paid: $3,650