Does Greater Access to Employees with Information Technology Capability Improve Financial Reporting Quality?

Posted: 28 Apr 2023

See all articles by John L. Abernathy

John L. Abernathy

Kennesaw State University

J. Philipp Klaus

University of Texas at Arlington - Department of Accounting

Linh Le

University of Nebraska at Omaha

Adi Masli

University of Kansas - School of Business

Date Written: April 13, 2023

Abstract

While information technology (IT) plays an essential role in financial reporting, many companies today lack sufficient human capabilities to utilize IT competently. We examine the association between a firm’s access to IT-capable labor and financial reporting quality (FRQ). We proxy for access to IT-capable labor using workforce measures in the metropolitan statistical area (MSA) where the firm operates, including (1) the number of IT-related college degrees relative to the total active workforce, (2) the level of education of IT graduates, (3) the income level of IT graduates, and (4) a composite measure. We find that firms in MSAs with a higher IT-competent labor force are associated with fewer financial reporting misstatements and internal control issues. This study contributes to the emerging literature stream examining the influence of geographic labor characteristics on firm-level outcomes and the research on the impact of IT capability on financial reporting processes. We also inform the current movement of integrating IT knowledge into the education curriculum.

Keywords: information technology, financial reporting quality, IT capability, employee IT competency

Suggested Citation

Abernathy, John L. and Klaus, Jan Philipp and Le, Linh and Masli, Adi, Does Greater Access to Employees with Information Technology Capability Improve Financial Reporting Quality? (April 13, 2023). Forthcoming, Contemporary Accounting Research, https://doi.org/10.1111/1911-3846.12869, Available at SSRN: https://ssrn.com/abstract=4420371

John L. Abernathy

Kennesaw State University ( email )

1000 Chastain Road
Kennesaw, GA 30144
United States

Jan Philipp Klaus

University of Texas at Arlington - Department of Accounting ( email )

Arlington, TX 76019
United States

Linh Le

University of Nebraska at Omaha ( email )

Adi Masli (Contact Author)

University of Kansas - School of Business ( email )

1300 Sunnyside Avenue
Lawrence, KS 66045
United States

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