The Effect of Enterprise Systems Implementations on the Firm Information Environment

51 Pages Posted: 26 Dec 2009 Last revised: 26 Jul 2014

See all articles by Carlos Alberto Dorantes

Carlos Alberto Dorantes

ITESM Campus Querétaro

Chan Li

University of Kansas

Gary F. Peters

University of Arkansas at Fayetteville

Vernon J. Richardson

University of Arkansas at Fayetteville

Date Written: March 17, 2012

Abstract

Proponents of Enterprise Systems argue that these systems improve the information environment of the firm. However, evidence on these benefits is largely anecdotal and survey-based. In this paper, we use 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, we hypothesize that if enterprise systems improve management’s access to decision relevant internal information, management should be able to produce higher quality earnings forecasts. Consistent with disclosure theory and the purported technical characteristics of enterprise systems, we find evidence that enterprise system implementations are subsequently associated with significant 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 enhancements in management’s ability to manage earnings. Prior literature and professional guidance points to the common challenges and importance of measuring the benefits of information technology investments. Our study responds to these challenges by providing an initial 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.

Keywords: Enterprise Systems, Internal Controls, Information Quality, Management Forecast, Earnings Quality

JEL Classification: M41, G3

Suggested Citation

Dorantes, Carlos A. and Li, Chan and Peters, Gary F. and Richardson, Vernon J., The Effect of Enterprise Systems Implementations on the Firm Information Environment (March 17, 2012). Contemporary Accounting Research, Forthcoming. Available at SSRN: https://ssrn.com/abstract=1526521 or http://dx.doi.org/10.2139/ssrn.1526521

Carlos A. Dorantes

ITESM Campus Querétaro ( email )

Epigmenio González 500
Fraccionamiento San Pablo
Querétaro, 76130
Mexico

Chan Li (Contact Author)

University of Kansas ( email )

Capitol Federal Hall
Lawrence, KS 66045
United States
7857661277 (Phone)
66045 (Fax)

Gary F. Peters

University of Arkansas at Fayetteville ( email )

Sam M. Walton College of Business
Department of Accounting
Fayetteville, AR 72701

Vernon J. Richardson

University of Arkansas at Fayetteville ( email )

401 WCOB
Fayetteville, AR 72701
United States

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