Accounting Association Honors DeSales Professor for Work on CEO / Shareholder Conflicts and IT Outsourcing Decisions
Dr. Stephen Liedtka, assistant professor in the DeSales University Department of Business, was honored for his research on CEO / shareholder conflicts and information technology outsourcing decisions, during the 2008 American Accounting Association (AAA) Mid-Atlantic Regional Meeting held in Philadelphia recently.
Liedtka, in collaboration with Dr. James Hall, associate professor of accounting at Lehigh University, co-authored the paper, "CEO / Shareholder Conflicts and Large-Scale Information Technology Outsourcing Decisions." For their work, they received the outstanding paper award at the conference.
The AAA Mid-Atlantic Region has more than 700 members. The paper by Liedtka and Hall was one of 88 research papers accepted for the conference.
"The importance of understanding the potential for conflicts of interest between CEOs and shareholders in regards to IT outsourcing cannot be understated," says Liedtka.
Liedtka maintains that large-scale IT outsourcing contracts can generate short-term cash flows and illusory improvements to financial statements, but not without significantly increasing long-term firm risks. These risks include the potential for substantial unexpected cost, overdependence on vendors, security and internal control problems, and the loss of strategic advantage.
As part of their research, Liedtka and Hall investigated whether high-risk, large-scale IT outsourcing decisions indicate a potential conflict between CEO and shareholder interests. Their findings suggest that CEOs are most likely to endorse large-scale IT outsourcing decisions when they anticipate leaving office prior to any negative repercussions.
Also, since CEOs can manipulate financial reports through IT outsourcing, large-scale outsourcing agreements can predict subsequent accounting scandals.
Liedtka and Hall examined 69 firms that announced large-scale IT outsourcing agreements from 1994 to 2003. Their findings indicate that a disproportionate number of large-scale outsourcing contracts were announced during the last full year of a CEO's tenure and by firms in which accounting problems surfaced following the collapse of Enron Corporation. Their results have significant implications regarding IT performance, firm governance and financial reporting.
"A firm's announcement to enter into a large-scale IT outsourcing arrangement should send a strong signal to shareholders, boards, auditors and regulators that both executive motivations and the firm's financial health may be in need of close examination," says Liedtka.
Liedtka, a resident of Bethlehem, joined the DeSales faculty in 2007. His area of expertise includes measurement and use of accounting information for business decision-making. He earned a B.S. in commerce and M.S. in accounting from the University of Virginia, and a Ph.D. in accounting from the University of Maryland. A CPA, Liedtka is an active member of the American Accounting Association and the Institute of Management Accountants.
Prior to DeSales, Liedtka was a faculty member in Lehigh University's College of Business and Economics where he was the inaugural winner of the Robert and Christine Staub Faculty Excellence Award. Before that, he taught at the University of Maryland, where he earned four teaching awards.
Press Release: Accounting Association Honors DeSales Professor for Work on CEO / Shareholder Conflicts and IT Outsourcing Decisions | Posted on: 5/6/2008
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