Firm Value Effects of Web Site Redesign

The redesign of a web presence can be classified as both an IT investment and an ecommerce initiative. The empirical literature provides some evidence that the market is sensitive to e-commerce announcements via press releases, but it is not known what types of announcements affect the value of the firm. Our research examines the issue of web site redesign in commercial organizations by studying what kinds of organizations announce changes to their web presence, and by analyzing the value of such redesign initiatives for publicly traded firms. Using the event-study methodology, we investigate the effects of web site redesign announcements for a sample of press releases from 1995 to 1999. Our findings suggest that refining a web presence does not produce significant firm valuation adjustments. However, cross-sectional analyses reveal that web site redesign increases the value of service firms. ACKNOWLEDGEMENT: This document cannot be reproduced in any form without written permission from the authors. This research was funded in part by a PSC-CUNY Research Grant # 64554-00 33. The opinions expressed herein are solely those of the authors and not those of the sponsors of this project. The authors are very grateful to Mike Gallivan, Marios Koufaris, Hugo Levecq and Detmar Straub for their comments and suggestions and to May Li and William Hampton-Sosa for their research assistance.