The Effect of CEO IT Expertise on the Information Environment: Evidence from Earnings Forecasts

• In Event: IT Expertise

Abstract

Firms depend on information technology to provide high quality internal information, but prior research suggests that IT is underutilized (Venkatesh et al. 2008). Therefore, using a sample of S&P 1500 firms, we investigate whether firms that employ CEOs with IT expertise make forecasts that are more accurate. We argue that CEOs with IT expertise are more likely to encourage the utilization of IT in making earnings forecasts, thus increasing the accuracy of the forecasts. This argument is supported by prior research that suggests that when CEOs have experience with IT, then IT is more likely to be accepted throughout their firms (Finney and Corbett 2007). Overall, we find that CEOs with IT expertise make forecasts that are more accurate. Additionally, we find that analysts benefit from the improved information environment because we find that analysts that follow firms that employ CEOs with IT expertise issue more accurate earnings forecasts. Finally, in additional tests we also find that CEOs with IT expertise do not manage earnings to ensure accurate forecasts.

Authors

• Jacob Zachary Haislip, Binghamton University, SUNY

• Vernon J Richardson, University of Arkansas