Updating Accounting Systems: Longitudinal Evidence from the Health Care Sector
Management Science, Forthcoming
43 Pages Posted: 18 Jun 2019 Last revised: 15 Sep 2019
Date Written: June 10, 2019
This paper provides evidence on the determinants and economic outcomes of updates of accounting systems (AS) over a 24-year time-span in a large sample of U.S. hospitals. We provide evidence that hospitals update their AS in response to three types of pressures: economic pressures, such as increases in the quality of accounting information driven by vendor rollouts of improved AS; coercive pressures imposed by regulators mandating certain practices, such as internal control practices imposed by Sarbanes-Oxley Section 404; and mimetic pressures for hospitals to conform their AS to those of their peers, such as local county and prominent “celebrity” peers. We find that only economically driven updates lead to economic benefits in the form of lower operating expenses and higher revenues. In contrast, we find some evidence that AS updates prompted by coercive regulatory pressures actually impose economic costs in the form of higher operating expenses.
Keywords: Management Accounting, Accounting System Updating, Health Care Costs, Sarbanes-Oxley Act Section 404, Economic Determinants, Mimicry, Coercion
JEL Classification: M41, I1, L86
Suggested Citation: Suggested Citation