Taking action to reduce board-level information asymmetry: the adoption of enterprise information systems
Abstract
Purpose
The timeliness and quality of information provided to board members are crucial for them to effectively monitor and advise a firm. This study examines the influence of board composition and structure on (1) the board’s actions to mitigate the information asymmetry problem by implementing enterprise information systems (EIS) and (2) the board of directors’ awareness of information asymmetry, their perception of its causes and their efforts to address it.
Design/methodology/approach
Our research employs a mixed-methods approach. First, using data from 115 publicly listed Chinese companies, we empirically assess the likelihood of top-level EIS modules adoption at the firm level. Subsequently, through 23 semi-structured interviews, we aim to gain deeper insights into the behavioral motivations behind directors’ attempts to reduce information asymmetry.
Findings
The study reveals that boards with a higher number of independent directors or with a strategy committee – indicative of a greater concern regarding information asymmetry problems – are more inclined to adopt top-level EIS modules. Additionally, we identify three primary sources of information asymmetry that directors consider significant in prompting the adoption of top-level EIS modules to alleviate perceived information asymmetry.
Originality/value
This study contributes to both the corporate governance and information systems literature. The implementation and utilization of EIS at the board level have not been extensively explored previously. Moreover, while the issue of information asymmetry at the board level is recognized as a critical governance challenge, the ways in which directors perceive and address this issue remain largely unknown. Our research seeks to illuminate this relatively less-explored area.
Keywords
Acknowledgements
We are grateful for the editorial guidance and helpful suggestions of editor Prof. Alain Chong and anonymous reviewers. We thank Young-Kyu Kim, Barney Tan, Allya Koesoema, Shayne Gary, George Shinkle, Luke Younghoon Chang, participants at the School of Management and Governance’s brownbag seminar series at UNSW Business School and session participants at ANZAM and AOM Conferences for their valuable suggestions on earlier versions of this manuscript. Finally, we appreciate all the interviewees and firms who voluntarily provided their help and assistance during the various stages of this research project.
Funding: This research did not receive any specific grant from funding agencies in the public, commercial or not-for-profit sectors.
Citation
Niu, J., Ozdemir, S.Z. and Kim, Y.U. (2024), "Taking action to reduce board-level information asymmetry: the adoption of enterprise information systems", Industrial Management & Data Systems, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/IMDS-03-2024-0172
Publisher
:Emerald Publishing Limited
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