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Paper Type

Complete

Paper Number

2272

Description

Investments in information technology (IT) are often justified based on their potential to improve the quality of internal information, which is the basis for public disclosures of firm performance, such as management forecasts. Thus, understanding how IT investments influence the incidence and quality of management forecasts provides a way to assess their impact on the quality of internal information. Using archival data from 1999 through 2006 for more than 330 firms, we examine whether firms with greater IT investment intensity are more likely to provide management forecasts, and also whether the timeliness, specificity and accuracy of management forecasts are increasing in IT investment intensity. Overall our evidence suggests that IT investment is associated with higher quality internal information that translates into higher provision and quality of externally disclosed information, as reflected in management forecasts.

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Dec 14th, 12:00 AM

Information Technology Investments and Management Forecasts: Theory and Evidence

Investments in information technology (IT) are often justified based on their potential to improve the quality of internal information, which is the basis for public disclosures of firm performance, such as management forecasts. Thus, understanding how IT investments influence the incidence and quality of management forecasts provides a way to assess their impact on the quality of internal information. Using archival data from 1999 through 2006 for more than 330 firms, we examine whether firms with greater IT investment intensity are more likely to provide management forecasts, and also whether the timeliness, specificity and accuracy of management forecasts are increasing in IT investment intensity. Overall our evidence suggests that IT investment is associated with higher quality internal information that translates into higher provision and quality of externally disclosed information, as reflected in management forecasts.

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