The value relevance of network advantages: The case of e-commerce firms

Journal Article (Review;Journal)

We show that network advantages constitute an important intangible asset that goes unrecognized in the financial statements. For a sample of e-commerce firms, we find that network advantages created by Web site traffic have substantial explanatory power for stock prices over and above traditional summary accounting measures such as earnings and book value of equity. Also, network advantages are positively associated with one-year-ahead and two-year-ahead earnings forecasts provided by equity analysts. When we allow network advantages to be endogenously determined by managerial actions, we find that at least part of the value relevance of network effects stems from the presence of affiliate referral programs and higher media visibility.

Full Text

Duke Authors

Cited Authors

  • Rajgopal, S; Venkatachalam, M; Kotha, S

Published Date

  • January 1, 2003

Published In

Volume / Issue

  • 41 / 1

Start / End Page

  • 135 - 162

International Standard Serial Number (ISSN)

  • 0021-8456

Digital Object Identifier (DOI)

  • 10.1111/1475-679X.00099

Citation Source

  • Scopus