The Corporate Governance of Digital Transformation: The CEO’s Digital Orientation and Board Impact

Building on the sociology-grounded perspective on capital markets we argue that in conditions of technological change, investor perceptions about firm value are enhanced by the CEO’s orientation towards digital technologies. This base relationship is moderated by the extent to which boards allow and support experimentation with, and implementation of, new technologies. To test our theory, we focus on the early phases of the so-called “digital transformation” (2003 to 2016). We test our hypotheses using a sample of S&P 500 companies and a unique, hand-collected, set of measures associated with digital technology orientation by the CEO, as well as board members’ digital expertise. We suggest that: (a) board monitoring power is not always positively perceived by investors as widely implied in the extant agency-grounded literature; and (b) effective board monitoring is associated with complementarities between digital expertise of independent directors and the knowledge requirements underpinning CEO’s strategic orientation.