Senior Executives’ Digital Agency and Abnormal Market Returns

By Sudhir Voleti, ABHISHEK KATHURIA

Citation

Voleti, Sudhir., KATHURIA, ABHISHEK. (2025). Senior Executives’ Digital Agency and Abnormal Market Returns .

2025

Abstract

Digital technologies play a crucial role in the growth and success of firms. Thus, investors are becoming increasingly interested in gaining information about a firm’s investments in, and strategic leverage of these technologies. Recent work suggests that since senior executives hold important non-public information regarding digital technology initiatives, their purchases of a firm’s stock before a digital technology investment act as signals that reduce information asymmetry between the executives and external investors, and thereby are associated with long-term abnormal stock returns (Havakhor et al. 2022). Note that this study also fails to find any short-term abnormal returns associated with digital technology initiatives. We suggest that while these prior studies fail to find short-term returns to specific digital technology initiatives (such as business intelligence and analytics initiatives), forward-looking references to digital technologies in senior executives’ communications with external investors could plausibly elicit short-term abnormal returns. [Add strong form arguments here]. Specifically, we posit that as communication forms the basis for action to achieve a goal, senior executives’ communications are reflective of their attempts to influence other stakeholders (shareholders, analysts, and employees) of their agency and preferences and thereby shape firm behavior and performance (Eklund and Mannor 2021; Ocasio 1997; Yadav et al. 2007). Thus, we argue that references to digital technologies in quarterly earnings calls reflect senior executives’ agency and preferences related to the leverage of digital technology in firm strategy, and hence act as a valuable signal to investors regarding the strategic leverage of digital technologies in the firm.

Sudhir Voleti is an Associate Professor of Marketing at the Indian School of Business (ISB), where he is also a distinguished faculty member in Business Analytics. A renowned researcher in the fields of marketing research and business analytics, he has previously served as Associate Dean of Faculty Alignment and the Registrar's Office (FARO) at ISB.

Professor Voleti holds a PhD in Marketing and an MS in Applied Statistics from the University of Rochester, a PGDM from Indian Institute of Management (IIM) Calcutta, and a BE from the Birla Institute of Technology, Ranchi, along with years of industry experience.

Professor Voleti is recognised as one of India's leading data science academicians. His research focuses on combining data with econometric and statistical methods to explain phenomena of marketing interest such as evolution in the equity of brands across time, valuation of brands using secondary sales data, the sales impact of geographic and abstract distances between products and markets, and the performance, productivity, and benchmarking of salesforce organisations.

Professor Voleti has published numerous research articles in leading academic journals such as Management Science, Journal of Marketing, Journal of the Royal Statistical Society, the International Journal of Research in Marketing, and the Journal of Retailing, as well as book chapters and articles in the popular media. He also serves on the editorial review boards of numerous journals. Some of his significant works include "Impact of Reference Prices on Product Positioning and Profits", "The role of big data and predictive analytics in retailing", "Why the Dynamics of Competition Matter for Category Profitability", "A Bayesian non-parametric model of residual brand equity in hierarchical branding structures", and "An Approach to Improve the Predictive power of Choice - Based Conjoint Analysis".

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Sudhir Voleti