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The Effect of Enterprise Systems Implementation on the Firm Information Environment

Author

Listed:
  • Carlos‐Alberto Dorantes
  • Chan Li
  • Gary F. Peters
  • Vernon J. Richardson

Abstract

This study uses an archival research design to assess the impact of enterprise systems on a firm's internal information environment as reflected in the production of management earnings forecasts. Specifically, the authors hypothesize that, if enterprise systems improve management's access to decision‐relevant internal information, higher quality management earnings forecasts should ensue. Consistent with disclosure theory and the purported technical characteristics of enterprise systems, the authors find a positive association between enterprise system implementations and subsequent increases in the likelihood of management forecast issuance and the accuracy of the forecasts. Additional robustness tests support the argument that improvements in management forecasts are due to improvements in the firm's internal information environment rather than to enhancements in management's ability to manage earnings. Beyond accumulating financial reporting information, the authors note that such systems provide management with information to make day‐to‐day operational decisions. Moreover, the paper provides a basis for considering management forecast qualities as a measurable proxy for improvements in the firm's internal information environment that result from information technology investments.

Suggested Citation

  • Carlos‐Alberto Dorantes & Chan Li & Gary F. Peters & Vernon J. Richardson, 2013. "The Effect of Enterprise Systems Implementation on the Firm Information Environment," Contemporary Accounting Research, John Wiley & Sons, vol. 30(4), pages 1427-1461, December.
    • Handle: RePEc:wly:coacre:v:30:y:2013:i:4:p:1427-1461
    DOI: 10.1111/1911-3846.12001
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    Cited by:

    1. Ferracuti, Elia, 2022. "Information uncertainty and organizational design," Journal of Accounting and Economics, Elsevier, vol. 74(1).
    2. Ning Jia & Arun Rai & Sean Xin Xu, 2020. "Reducing Capital Market Anomaly: The Role of Information Technology Using an Information Uncertainty Lens," Management Science, INFORMS, vol. 66(2), pages 979-1001, February.
    3. Sehwa Kim & Seil Kim & Anya V. Kleymenova & Rongchen Li, 2023. "Current Expected Credit Losses (CECL) Standard and Banks' Information Production," Finance and Economics Discussion Series 2023-063, Board of Governors of the Federal Reserve System (U.S.).
    4. Christensen, Brant & Lei, Lijun (Gillian) & Shu, Sydney Qing & Thomas, Wayne, 2023. "Does audit regulation improve the underlying information used by managers? Evidence from PCAOB inspection access and management forecast accuracy," Accounting, Organizations and Society, Elsevier, vol. 106(C).
    5. Jonnergård, Karin & von Koch, Christopher & Nilsson, Ola, 2020. "Information environment – An exploration and clarification of the concept based on prior literature," Advances in accounting, Elsevier, vol. 50(C).
    6. Sameh Ammar & Ghassan H. Mardini, 2021. "Enterprise resource planning enabling segmental information reporting practices of UK‐FTSE 100," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 61(1), pages 1205-1237, March.
    7. Chaitanya Sambhara & Arun Rai & Sean Xin Xu, 2022. "Configuring the Enterprise Systems Portfolio: The Role of Information Risk," Information Systems Research, INFORMS, vol. 33(2), pages 446-463, June.
    8. Li, Zhigang & Xie, Bingyuan & Chen, Ximing & Fu, Qilong, 2024. "Corporate digital transformation, governance shifts and executive pay-performance sensitivity," International Review of Financial Analysis, Elsevier, vol. 92(C).
    9. Koo, KwangJoo & Le, Linh, 2024. "IT capability and innovation," Technological Forecasting and Social Change, Elsevier, vol. 203(C).
    10. Zeyan Miao & Guohao Zhao, 2023. "Impacts of Digital Information Management Systems on Green Transformation of Manufacturing Enterprises," IJERPH, MDPI, vol. 20(3), pages 1-20, January.
    11. Kelly Huang & Brent Lao & Gregory McPhee, 2020. "Internal information quality and patent‐related innovation," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 47(3-4), pages 489-518, March.
    12. Habib Saragih, Arfah & Ali, Syaiful & Suwardi, Eko & Utomo, Hargo, 2024. "Finding the missing pieces to an optimal corporate tax savings: Information technology governance and internal information quality," International Journal of Accounting Information Systems, Elsevier, vol. 52(C).
    13. Rajiv Banker & Yi Liang & Narayan Ramasubbu, 2021. "Technical Debt and Firm Performance," Management Science, INFORMS, vol. 67(5), pages 3174-3194, May.
    14. Jinguo Xin & Kun Du & Yuqi Xia, 2024. "The Impact of Enterprise Digital Transformation on Audit Fees—An Intermediary Role Based on Information Asymmetry," Sustainability, MDPI, vol. 16(22), pages 1-21, November.
    15. Autore, Donald & Chen, Huimin (Amy) & Clarke, Nicholas & Lin, Jingrong, 2024. "Blockchain and earnings management: Evidence from the supply chain," The British Accounting Review, Elsevier, vol. 56(4).
    16. Chen, Zhongfei & Jiang, Kangqi, 2024. "Digitalization and corporate investment efficiency: Evidence from China," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 91(C).
    17. Markus Arnold & Florian Elsinger & Frederick W. Rankin, 2021. "The Unintended Consequences of Headquarters’ Involvement in Decentralized Transfer Price Negotiations: Experimental Evidence," Management Science, INFORMS, vol. 67(12), pages 7912-7931, December.

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