Knowledge Sharing – How IT Investments Reduce Corporate Fraud: Role of Firm and Industry Complexities

How IT Investments Reduce Corporate Fraud: Role of Firm and Industry Complexities

Presenter: Pouya Rahmati
University of Georgia
Assistant Professor
Department of Management Information Systems

ABSTRACT. Although corporate fraud has been an important concern for managers and stakeholders, the role of information technology (IT) investments in reducing corporate fraud has received limited attention in extant literature. This study examines the role of two types of IT investments—internal-facing IT investment and external-facing IT investment—in reducing corporate fraud. Drawing on the idea that IT reduces information asymmetries in complex environments, we hypothesize that internal-facing IT investment and external-facing IT investment reduce corporate fraud in conditions of firm complexity and industry complexity. We test our hypotheses using secondary longitudinal data of 2019 firm-year observations from 589 public U.S. firms across the 2006-2009 timeframe. Consistent with our hypotheses, we find that although IT does not have a significant unconditional effect on corporate fraud, firm complexity and industry complexity negatively moderate the effect of both types of IT investment on fraud. Our results are robust to endogeneity and other sensitivity tests. Our study contributes to theory and managerial practice by uncovering the significant role of IT investments in reducing corporate fraud in firms that face greater firm complexity and industry complexity.

Date: February 19, 2022 (Saturday)
Time: 1:00 PM EST (7:00 PM CET | 9:30 PM Tehran)
Zoom Link: irais.org/RTS
Passcode: It will be shared on the chapter’s group page.