Web traffic and firm performance: Evidence from the MENA region

Abstract

Does the traffic generated by websites of firms signal anything to stock market participants? Does higher web-traffic translate into availability of more information and therefore lower agency problems? And if answers to above questions are in affirmative, does higher web-traffic traffic translate into better firm performance? This paper aims to answer these questions by documenting a positive relationship between the extent of web-traffic and firm performance in the MENA region during the 2010. We argue that higher web-traffic lowers the agency problems in firms by disseminating more information to stock market participants. Consequently, lower agency problems translate into better performance. Furthermore, we also show that agency reducing role of web-traffic is more pronounced in regimes where information environment is already bad. For example, our results show stronger impact of web-traffic on firm performance in civil law countries, firms with concentrated ownership, and firms with more intangible assets. All of these groups are characterized by higher agency problems. Our results, therefore, indicate that webtraffic can play a substitute for traditional governance mechanisms in the MENA region. © by author(s).