Grounded in the debate on the business value of information technology (IT), research on IT capability is an important research stream since many years. Several studies highlight the strategic importance when studying the effects of IT capability on performance and other outcomes. Although firm-level effects are well understood, the effects on capital markets, especially investors, have rarely been explored. We fill in this gap and extend current research on IT business value by arguing that due to the multiple benefits of IT capability for organizations, institutional investors recognize and value a firm’s IT capability as an intangible asset and incorporate it into their investment decisions. We make use of the annual InformationWeek 500 ranking and accounting data to analyze the effect of IT capability on firms’ ownership structure. Our results provide evidence that firms possessing a superior IT capability are held by a higher share of long-term oriented institutional investors that trade less frequently. These findings are robust to alternative sampling strategies, industry differences, and the consideration of firm performance effects. We outline directions for further research and practical implications for executives and investors.