Firms are increasingly collecting and analyzing data from a wide range of sources. How do these data affect the interaction between firms and financial markets?

Using the staggered adoption of data technologies on firms’ websites, we show that customers’ data partially substitutes for the information that managers learn from financial markets. Data availability improves managers’ internal information about future product demand and reduces firms’ reliance on stock prices for investment decisions by about one half. The effect is consistent with data technologies replacing the informational role of stock prices. This “replacement effect” is robust to alternative explanations and reverses back under data-privacy restrictions. Our findings suggest that the diffusion of data technologies weakens the informational role of financial markets in guiding real investment decisions.