Management Accounting Section Midyear Meeting

A Little Goes a Long Way? Leveraging Accounting Information to Reduce Operational Uncertainty and Improve Operating Performance

• In Event: Internal Control Systems

Abstract

Leveraging the “value of information” concept from Decision Theory, we examine the extent to which accounting information can reduce operating uncertainty and improve operating performance. We extend Accounting Research’s concept of internal information quality to examine if more closely achieving this “low bar” might provide operational benefits. Utilizing a variety of secondary data sources and econometric modeling, we find that improved accounting information is associated with significant improvements in operating performance directly as well as indirectly through reducing operational uncertainties. Interestingly, the effects are up to 30 times larger at firms with the lowest accounting information quality as compared to those with the highest quality. Thus, we find even a little improvement in accounting information can go a long way to reduce operating uncertainty and improve operational performance for firms in the poorest informational environments.

Authors

• Alan Mackelprang, Georgia Southern University

• Adam W. Du Pon, Georgia Southern University

• Hari Ramasubramanian, Frankfurt School of Finance and Management