Impact of CEO's Digital Technology Orientation and Board Characteristics on Firm Value: A Signaling Perspective

Integrating signaling research with the institutional perspective on capital markets, we argue that, in conditions of radical technological change, investor perceptions about firm value are enhanced by the CEO's orientation toward digital technologies that exceeds the firm's industry peers. This base relationship is moderated by board characteristics so that the board members' digital expertise and knowledge diversity enhance the effect of the CEO's relative digital technology orientation on firm value. Furthermore, the monitoring power of independent board members who do not have digital expertise negatively moderates our baseline hypothesis, whereas board monitoring exerted by independent board members with digital expertise has a positive moderating effect. To test our theory, we use advanced natural language processing techniques to develop the CEO's relative digital technology orientation construct combined with a unique, hand-collected set of measures associated with board members' digital expertise and knowledge diversity in a sample of S&P 500 companies. Our article offers novel insights on how technology-related signals associated with the CEO's communications to shareholders interact with board characteristics in determining investor perceptions of the firm's value in conditions of high technological uncertainty.