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

Abstract

Firms depend on information technology to provide high quality internal information, but prior research suggests that IT is underutilized. Prior research suggests that when CEOs have experience with IT, then IT is more likely to be accepted throughout their firms. We take these arguments a step further by asserting that CEOs with IT expertise are more likely to encourage the utilization of IT throughout the firm, thus improving the information environment which is revealed through numerous outputs of the firm. We first investigate whether firms that employ CEOs with IT expertise make forecasts that are more accurate even if they already use enterprise systems (Dorantes, Li, Peters, and Richardson 2013). Overall, we find that CEOs with IT expertise do 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. We also find that CEOs with IT expertise announce earnings faster than other CEOs.