Week 6 – Masli et al -Siddharth Bhattacharya

The paper talks about the effect of IT deficiencies on higher executive(CEO/CFO) turn over in firms. Most of the previous research has applied the framework that the greater the shared knowledge and mutual trust among top executives greater the success among IT firms.This body of knowledge has not shed any light on which senior executives should take care of which specific IT management activities etc.Thus the paper tries to answer for which IT management responsibilities are particular senior executives held accountable for serious IT deficiencies?.The paper takes advantage of the Sarbanes-Oxley Act of 2002 (SOX) which was established to strengthen internal controls over financial reporting by U.S. public firms helping capture IT material weakness.Te paper next goes on to develop multiple hypothesis that firms reporting higher number of IT material weaknesses will experience greater likelihood of CEO/CFO turnover.Next,the authors divide the material weakness into categories of global IT material weakness,demand and supply side IT materiel weakness and posit that firms reporting higher number of global/demand side IT material weaknesses will experience greater likelihood of CEO/CFO turnover.Using data from Audit Analytics, authors examined each firm’s reported material weaknesses and classified each as either an IT material weakness or a non-IT material weakness.Then they combined data from SEC proxy statements to identify CEO/CFO turnovers.The analysis involves probit regression with CXO turnover as dependent variable and NUmber of IT weaknesses/number of non-IT weaknesses as IVs.The results show Number of IT Weaknesses is significant in predicting CEO
turnover.Results also show that IT Architecture,IT Control Oversight–External are significant predictors as well.It also shows that IT Control Oversight–Internal to be a strong predictor.The results are robust and Heckman model controls for any endogeniety concerns due to selection bias.The the findings suggest that CEOs and CFOs were observed to be selectively affected by serious IT deficiencies. For CEOs, deficiencies traced to IT Architecture and to IT Control Oversight–External were associated with higher turnover likelihoods. For CFOs, deficiencies traced to IT Control Oversight–Internal were associated with higher turnover.Inconsistencies and limitations of the study are discussed.Contributions to IS,managements and practice are discussed.