When Do Appointments of Chief Digital or Data Officers (CDOs) Affect Stock Prices?

Abstract

This article investigates the stock market reaction to appointments of newly created chief digital or data officer (CDO) positions. The analysis is based on a sample of 112 CDO appointment announcements by publicly traded companies listed in the US stock market from 2004 to 2017. We ground our arguments in signaling theory along with the institutional entrepreneurship and synergy and redundancy perspective to understand the factors that could influence the market reaction to CDO appointments. Although the results show that the stock market reacts neutrally to announcements of newly created CDO positions, the market does react positively under certain conditions. The market reacts positively when appointing firms exhibit high growth prospects. The article supports the redundancy perspective, and the results show that the market reacts positively when a potentially conflicting and overlapping role such as chief information officer (CIO) is absent in appointing firms. Our analysis also shows that when CIO is absent, the market reacts more positively to outsider CDO relative to insider CDO, thereby indicating the interaction between redundancy and institutional entrepreneurship perspectives.

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