Protagonists in digital transformation: The impact of chief digital officers on firms’ financial performance

Although many firms have started to appoint chief digital officers (CDOs) to lead enterprise-wide digital transformation, it is unclear what type of CDOs can really help improve firms’ financial performance. Analyzing the CDO appointments of 158 S&P 500 companies from 2002 to 2019, our research shows that CDO appointments do help improve forward-looking firm performance, measured in terms of Tobin's q. We further find that the performance improvement is more pronounced when the CDOs are externally hired (rather than internally promoted) and when they are generalists with overall responsibilities (rather than specialists focusing on an explicit functional area). Therefore, while it is important to appoint a dedicated CDO to lead the uncertain, challenging digital revolution and improve firm performance, the effectiveness of such an appointment is dependent on how the appointment is made. These findings provide important implications for future research on CDO and for firms to reap more benefits from their CDO appointments.