Management Accounting Section Midyear Meeting

Does Information Technology Reduce Corporate Misconduct?

• In Event: Internal Control Systems

Abstract

This study examines whether and how information technology reduces corporate misconduct. Specifically, we study the effects of staggered facility-level rollouts of enterprise resource planning (ERP) systems on facility-level misconduct across a large sample of U.S. firms. Our results indicate that ERP adoption reduces facility-level violations and penalties. These effects are concentrated among ERP implementations that incorporate more comparable and timelier data and utilize more advanced data analytics. In addition, ERP systems have a muted effect on compliance outcomes for facilities with smaller software budgets and higher local resistance to technology, suggesting that capital and labor constraints can inhibit ERP system efficacy. Overall, our results suggest that information technology plays a significant role in enhancing internal firm monitoring and compliance.

Authors

• Jonas Heese, Harvard University

• Joseph Pacelli, Harvard University