Determinants of shareholder value creation - platform versus traditional business models

Rachna Banerjee and Sudipa Majumdar

International Journal of Business Performance Management, 2020, vol. 21, issue 1/2, 230-244

Abstract: The digital era has given an opportunity to other businesses to disrupt the traditional markets and migrate to platform models to make them more relevant in today's digitalised economy. The value created in platform model is multi-way where a consumer and a producer continually switch roles, which is unlike the linear value creation model of a traditional company. This research contributes to the literature on shareholder value creation by analysing the effect of traditional accounting based and economic based measures on value for platform and traditional business model companies, aimed at identifying and presenting the financial performance (profitability) measures relevant to these two contrasting business models. The study includes a sample of 14 heterogeneous companies selected from the top 100 largest public companies in the world by market value, from 2008-2017. Using panel data analysis, we find that accounting based measures performed better than economic based indicators of value as measured by stock returns. Growth in earnings per share (EPS) was the best value driver for both platform model and traditional firms. Dividends per share (DPS) and return on equity (ROE) were also found to be significant indicators of value creation for traditional model companies, whereas for platform model, the effect of DPS was insignificant.

Keywords: shareholder value; platform business model; PBM; traditional business model; stock returns; panel data analysis. (search for similar items in EconPapers)
Date: 2020
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