This study examines the risk effect of IT outsourcing on firm performance and value in different types of contracts categorized by contract value and contract term. We used audited financial data to investigate the impact of IT outsourcing on firms performance and value. We examined the performance and value in a sample of 90 publicly traded firms that outsourced their IT activities between 1986 and 2009, over a four-quarter period following the outsourcing announcements. Our findings confirm the trend of shrinking outsourcing contract value and term in reality. The results reveal that short-term and low-weight IT outsourcing contracts improve firms performance more than long-term and high-weight contracts.

This study focuses on the information technology (IT) outsourcing decision and asks whether reported financial statement data can measure short-term financial effects of the IT outsourcing decision and thus add to the literature on the benefits of outsourcing. In this study we used accounting metrics derived from archival financial data to assess the impact of IT outsourcing on firms performance measures. In the sample of 79 firms from 1986 to 2009, there were 45 firms in the manufacturing sector and 34 firms in the service sector. The comparative study between manufacturing and service sectors will help identify where the higher potential of outsourcing impact lies. Firms performance is measured over a two-year period, one year before and one year after outsourcing decisions were made. For performance measures, we used cost efficiency, productivity, profitability, growth, cash management, and market ratio metrics. Using accounting metrics we show that IT outsourcing has a favorable short-term impact on manufacturing firms cost efficiency, productivity, and cash management. At the same time outsourcing the IT function has little favorable impact on service firms short-term performance measures.

This paper reviews earnings management literature from the perspective of the financial statement analyst. The analyst will want to know if the company being analyzed is likely to have manipulated or managed the financial statement numbers, which numbers in the financial statements are most likely to have been managed, and the magnitude of the management.For several decades researchers have been documenting the manipulation or management of financial statement numbers. They have documented various management devices and a host of contexts that provide incentive to manage. Yet, this review reveals that an individual analyst, working to understand a single company, has little to guide him or her in assessing the probability that the firm under consideration has managed financial statement numbers, which numbers may have been managed, and to what extent they may have been managed. While much work has been done and many papers published, the hard work of making the research useful to the financial statement user remains to be done.

The researcher examines the Information Technology (IT) outsourcing risk avoidance tolerance of managers by measuring the effect on organizational performance. IT outsourcing risk avoidance factors were partitioned by the value of long-term versus short-term and high-value versus low-value contracts. The sample was obtained from the financial archival data of 79 firms during the period of 1986 to 2009. The risk-avoidance effect was evaluated in terms of financial metrics. Cost efficiency, productivity, profitability, growth, cash management, and market ratio were calculated to measure each company's performance. Organizational performance was the dependent variable, which was measured by comparing fluctuations of the stock's market value. The findings indicate that manufacturing firm performance was better with short-term and low-value contracts. However, the results are mixed for service firms. In manufacturing firms, the market reacted positively when managers announced long-term and high-value outsourcing contracts to avoid IT risks. By contrast, the market reacted positively when low-value and long-term outsourcing contracts were selected by service firm types in the sample.

We are interested in the effects of dividend reduction decisions on the firms that make them. We compare financial ratios of distressed dividend-reducing firms to distressed firms that did not reduce dividends, of nondistressed dividend-reducing firms to nondistressed firms that did not reduce dividends, and ratios of distressed dividend- reducing firms to nondistressed dividend-reducing firms. Results indicate benefits of dividend reductions to both distressed and nondistressed firms. We find a cost to nondistressed firms, i.e., a drop in the market value of the firm in the year following the dividend reduction.