The value‐relevance of financial and non‐financial information for Internet companies

This article assesses the extent to which non‐financial measures of Internet usage are incrementally value‐relevant over and above basic financial information across four Internet industry sectors. Using ordinary least squares (OLS) regression analysis we test the extent to which net income, book value, unique users, page views, and hours per user are able to explain stock prices for a sample of 341 firm quarters for the period Q1: 1999–Q1: 2000. Our results indicate that net income has no ability to explain market values for the pooled sample or for any of the Internet sectors examined. With respect to the non‐financial variables, we find that for e‐tailers and content/community firms, page views have the greatest explanatory power. For service companies, unique users have the greatest ability to explain market values, and for infrastructure companies, none of our non‐financial variables are significant.