Does Information Technology Reduce Corporate Misconduct?
By Jonas Heese, Harvard Business School, on July 20, 2023, 2:15 p.m. - 3:45 p.m.
This study examines whether information technology (IT) reduces corporate misconduct. Specifically, we study the effects of staggered facility-level rollouts of enterprise resource planning (ERP) systems on facility-level regulatory violations across a large sample of U.S. firms. Our results indicate that facility-level ERP adoption reduces local non-financial violations and penalties. Additional analyses suggest that the benefits of ERP adoption stem from the system’s ability to enhance managerial monitoring and constrain employee choice. Overall, our results suggest that information technology plays a significant role in enhancing compliance outcomes across a wide range of non-financial violations that are relevant for firms’ compliance with environmental, social and governance (ESG) regulations.