Value relevance of financial and non-financial information in emerging industries: the changing role of web traffic data



Publishing details

Authors / Editors

Talmor E; Jorion P


Publication Year



The value relevance of financial and non-financial information is viewed in light of the theory of lifecycle stages. The study tests the evolving role of common financial statement and web traffic metrics for Internet companies. Previous work has reported that web usage measures are of high value relevance, or offer much greater explanatory power than conventional financial accounting information for market values. We do find that conventional financial data, including gross profit and realized growth rates in sales and in gross profit, are value relevant, but to a lower extent than web traffic data. As the industry matures, however, we would expect these relationships to change. Indeed we find that gross profit and R&D become increasingly value relevant as indicated by time trends. Importantly, there is a clear negative time trend in the eyeball measures. Hence, although still of high importance, the value relevance of non-financial metrics has materially diminished over the 24 months testing period. Accounts for the change in market sentiment during the testing period does not change this finding. The results confirm the view that different value metrics should be used at different stages of the life of an industry. Testing whether the life-cycle theory is anchored more to the maturity of the industry or to that of the individual company, we find the value relevance of non-financial vis-à-vis financial measures to be tied only to the maturity of the sector as a whole.

Series Number

ACCT 021


Accounting Working Paper