Firm Website And Cost Of Equity

Websites have become an essential component in firms’ IT portfolios. Many business processes require website functionalities to operate smoothly. This study aims at investigating how firm website affects cost of equity, an important factor in firm valuation. We conducted a cross-sectional regression using a unique dataset consisting of 3,312 firm websites operated by US public firms. Firm website measures, including size, number of in-links, and traffic, were collected from public sources. Empirical results indicate that higher website traffic is associated with lower cost of equity after controlling for firm-specific characteristics. Improving website traffic ranking from the bottom 10% to the top 10% leads to a 3% decrease in annual cost of equity. The results are both statistically and economically significant. Other firm website measures, such as size and the number of in-links, have no effect on cost of equity