Developing a decision support system to detect material weaknesses in internal control

2021 | Decision Support Systems | Citations: 2

Authors: Nasir, Murtaza; Simsek, Serhat; Cornelsen, Erin; Ragothaman, Srinivasan; Dag, Ali

Abstract: Wells Fargo employees set up 3.5 million fraudulent accounts over several years. ... Expand

Abstract: Wells Fargo employees set up 3.5 million fraudulent accounts over several years. Wells Fargo ended up paying $4.5 billion in fines. The Wells Fargo scandal highlights the importance of management actions to prevent misstatements and potential frauds on a timely basis. This study utilized the design science research paradigm to develop a predictive framework (IT artifact) in order to stratify firms into multiple risk groups for disclosing material weakness(es) in internal control (MWIC). The proposed methodology employed a hybrid heuristic optimization-based machine learning methodology. Synthetic minority over-sampling technique (SMOTE) was uti­ lized to handle the learning problem with the imbalanced data. The best performing model was the proposed hybrid Genetic Algorithms (GA) and Support Vector Machines (SVM). The proposed methodology was internally validated via k-fold cross validation, and then externally validated using several separate datasets. The (GA) selected variables were ranked from the most important to the least through Information fusion (IF) sensitivity. A web-based decision support system was built to predict the firm-specific MWIC risk category. The web-based tool can be used to create an early warning system for predicting MWIC(s). Collapse

Topics: decision support system database system Sarbanes–Oxley Act missing data

Methods: support vector machine computational algorithm machine learning sensitivity analysis classification method

Theories: financial theory

“Stonks to the Moon”: Evidence from Reddit posts and Corresponding Market Manipulation

2021 | Americas Conference on Information Systems | Citations: 0

Authors: Padalkar, Nakul

Abstract: BloombergBusinessweek is calling the $GME rally a bonkers manipulation of the s ... Expand

Abstract: BloombergBusinessweek is calling the $GME rally a bonkers manipulation of the stock market by smalltime traders. This paper analyses more than 1.1 million Reddit comments and posts belonging to a few subreddits like r/wallstreetbets, r/stocks, r/stockmarkets, r/options about the 'meme stocks' on the New York stock exchange (NYSE) and Chicago Board of Options Exchange (CBOE) and evaluate their impact on stock price, volume, and volatility. We measure the Bullishness of given stocks using text mining and semantic analysis methods and utilize Wall Street Journal news stories as controls. The preliminary finding suggests strong evidence of predicting market volatility. We believe that the higher Reddit sentiment indicates higher stock volume, and the high frequency of posts (representing agreement) affects stock returns, traded volume, and volatility. We hope to show that social medial message boards, like Reddit, can be used as a reliable source to predict returns, volatility, and volume of the commodities traded on the stock market. Collapse

Topics: Reddit application programming interface web forum price management

Methods: natural language processing longitudinal research computational algorithm machine learning method econometric modeling

Theories: financial theory behavioral economics

On the Ex Ante Valuation of IT Service Investments: A Decision Theoretical Perspective

2016 | Business & Information Systems Engineering | Citations: 0

Authors: Buhl, Hans Ulrich; Häckel, Björn Steven; Probst, Florian; Schosser, Josef

Abstract: The paradigm of service orientation and its incarnation in the form of service- ... Expand

Abstract: The paradigm of service orientation and its incarnation in the form of service-oriented architecture (SOA) and information technology (IT) services play a crucial role in enabling companies to achieve considerable competitive advantages. However, to be able to leverage the opportunities of SOA and IT services, companies need to gain a thorough understanding of the business value of IT service investments. Nevertheless, research on IT services has focused mainly on technical questions so far; the economic perspective largely has been neglected. Therefore, the authors aim to contribute to the ex ante valuation of IT service investments from a decision theoretical point of view. Using decision theory as a theoretical base, the main aim is to identify and discuss specific challenges regarding the financial ex ante valuation of IT service investments, which arise from the inherent flexibility of IT services and the various interdependencies within a company's IT service portfolio. The authors thereby emphasize that the application of common methods from financial theory for valuating IT service investments has to be treated with caution, as these methods are often tied to rather restrictive assumptions based on the specifics of capital markets. By analyzing different clusters of IT service investment decision problems using decision theory, the authors identify and discuss pitfalls that might occur when applying financial valuation methods to capture the flexibility and interdependencies of IT service investments. The decision theoretical considerations are intended to help build a solid basis for future multi-criteria valuation approaches, of which an essential component is a theoretically well-founded financial valuation. Collapse

Topics: IS value organizational value IT investment business process management organizational productivity

Methods: cluster analysis synthesis trade-off analysis method multiple criteria decision making structured literature research

Theories: decision theory financial theory options theory

The dynamic predictive power of company comparative networks for stock sector performance

2016 | Information & Management | Citations: 13

Authors: Chen, Kun; Luo, Peng; Xu, Dongming; Wang, Huaiqing

Abstract: As economic integration and business connections increase, companies actively in ... Expand

Abstract: As economic integration and business connections increase, companies actively interact with each other in the market in cooperative or competitive relationships. To understand the market network structure with company relationships and to investigate the impacts of market network structure on stock sector performance, we propose the construct of a company comparative network based on public media data and sector interaction metrics based on the company network. All the market network structure metrics are integrated into a vector autoregression model with stock sector return and risk. Several findings demonstrate the dynamic relationships that exist between sector interactions and sector performance. First, sector interaction metrics constructed based on company networks are significant leading indicators of sector performance. Interestingly, the interactions between sectors have greater predictive power than those within sectors. Second, compared with the company closeness network, the company comparative network, which labels the cooperative or competitive relationships between companies, is a better construct to understand and predict sector interactions and performance. Third, competitive company interactions between sectors impact sector performance in a slower manner than cooperative company interactions. The findings enrich financial studies regarding asset pricing by providing additional explanations of company/sector interactions and insights into company management using industry-level strategies. Collapse

Topics: social network big data digital news blog network effect

Methods: machine learning longitudinal research cross sectional research time series analysis support vector machine

Theories: financial theory

Integrated long- and short- term valuation of IT innovation investments

2015 | Electronic Markets | Citations: 0

Authors: Häckel, Björn; Isakovic, Vasko; Moser, Florian

Abstract: The growing need to innovate with IT requires wellfounded analysis of IT innovat ... Expand

Abstract: The growing need to innovate with IT requires wellfounded analysis of IT innovation investments. However, the time lag between such investments and the realization of an uncertain long-term value contribution challenges companies because of a conflict between short-term corporate management and the desire to maximize the company’s long-term company value. Complexity, inexperience, and high outcome uncertainty also make IT innovation investments risky, particularly as the investments relate to existing hardware, software, and human resources, and can affect the processes, products, and services of nearly every business unit in a company. This paper proposes an integrated long- and short-term valuation approach that incorporates an IT innovation investment’s effect on the value of a company’s IT portfolio. The approach simultaneously accounts for risks and interdependencies, and uses sensitivity analysis in the context of an application example to provide research and practice recommendations. Collapse

Topics: digital innovation innovation management decision making IT investment systems evaluation

Methods: sensitivity analysis literature study mathematical model case study design guideline

Theories: decision theory financial theory

Family Control and Family Firm Valuation by Family CEOs: The Importance of Intentions for Transgenerational Control

2012 | Organization Science | Citations: 5

Authors: Zellweger, Thomas M.; Kellermanns, Franz W.; Chrisman, James J.; Chua, Jess H.

Abstract: Family firms are thought to pursue nonfinancial goals that provide socioemotiona ... Expand

Abstract: Family firms are thought to pursue nonfinancial goals that provide socioemotional wealth, but socioemotional wealth is feasible only with family control of the firm. Using prospect theory, we hypothesize that socioemotional wealth increases with the extent of current control, duration of control, and intentions for transgenerational control, thus adding to the price at which owners would be willing to sell their firms to nonfamily buyers. Findings from two countries show that current control has no impact, and duration of control has a mixed impact. However, intention for transgenerational control has a consistently positive impact on the perceived acceptable selling price. Collapse

Topics: organizational value mobile phone accounting entrepreneurship

Methods: survey robustness check statistical hypothesis test field study ANOVA

Theories: prospect theory endowment effect loss aversion financial theory social identity theory

It Sourcing Portfolio Management for It Services Providers: An Approach for Using Modern Portfolio Theory to Allocate Software Development Projects to Available Sites

2012 | ACM SIGMIS Database | Citations: 0

Authors: Zimmerman, Steffen; Katzmarzik, Arne; Kundisch, Dennis

Abstract: Global sourcing of Information Technology (IT) work has become a widely accepted ... Expand

Abstract: Global sourcing of Information Technology (IT) work has become a widely accepted practice among transnational corporations. Most of the big IT Services Providers (ITSPs) maintain a portfolio of globally distributed delivery centers and have to decide on the assignment of specific software development projects to their available sites. ITSPs have to consider expected costs, risks, and interdependencies between projects and sites when making value-based sourcing decisions. However, value-based decision approaches that are both well founded in theory and applicable in practice have until now been missing in the Information Systems literature. As decision making with respect to the construction of portfolios of risky financial assets exhibits similar characteristics compared to value-based sourcing decision making, we base our approach on the Modern Portfolio Theory. This paper makes two contributions in this context: (1) It provides a conceptual foundation for the application of Modern Portfolio Theory within the scope of global sourcing of software development projects by ITSPs. Therefore, we adapt the Modern Portfolio Theory to ensure an optimal and full allocation of given software development projects to available sites. Our newly formed model considers site/project combinations as risky assets, assumes discrete portfolio shares, and factors in transaction costs as well as dependencies between both projects and sites. (2) It is the first to actually apply Modern Portfolio Theory using a real world business case. Thereby, we illustrate that using our model leads to considerably different project allocations to the available delivery centers of our case company as well as to substantially lower costs of the sourcing portfolio. Collapse

Topics: IT development project IS sourcing decision making productivity business process management

Methods: descriptive statistic sensitivity analysis optimization model decision tree classification

Theories: transaction cost economics portfolio theory financial theory

Evaluating IT Fashion Investments regarding Risk and Return

2011 | Americas Conference on Information Systems | Citations: 3

Authors: Moser, Florian

Abstract: IT fashions are IT innovations within a hyped phase. They are on the rise and cl ... Expand

Abstract: IT fashions are IT innovations within a hyped phase. They are on the rise and claimed to be “the next big thing”. Investing in IT fashions bears potential for high returns in case the technology becomes institutionalized and first mover advantages can be realized. Contrary, it bears the risk of investing in a losing technology. By waiting for others to make the first move organizations bypass this risk but accept the chance of being out-innovated. Depending on an emerging technology’s evolution and its characteristics, the extent of risk and return differ for each strategy. Literature regarding risk and return of IT investments does not address these idiosyncrasies adequately. Our aim is to outline risk/return for each strategy and characteristics of emerging technologies that determine its extent. Hence, this conceptual paper brings together IT fashion and IT investment literature to provide a basis for further research on the evaluation of fashionable IT innovations. Collapse

Topics: digital innovation IT investment systems evaluation

Theories: innovation theory decision theory financial theory

Would i use my personal blog for commercial exchange?

2009 | European Conference On Information Systems | Citations: 0

Authors: Henneberger, Matthias; Katzmarzik, Arne; Muller, Stephan

Abstract: As information-based processes are usually independent of the location or even t ... Expand

Abstract: As information-based processes are usually independent of the location or even the processor, they can be oftentimes either automated or relocated to foreign sites to profit from differences in wages. Both strategies bear enormous micro-economic potential in terms of cost savings. However, with the main focus on cost reduction, risk due to the uncertain development of effective labor costs or future transaction volumes are oftentimes either inadequately considered or neglected. This systematically leads to false decisions, in particular since the two strategies – relocation and automation – result in different risk profiles. In this paper, we analyze the conditions for automating or relocating parts of business processes and propose a decision model that suggests a risk/return efficient allocation to the alternatives. In particular, we consider how uncertainties of effective labor costs and transaction volumes influence the decision. As shifting tasks to other locations has effects on the workload at the original location, we also take into account costs for social effects. The practicability of our approach is demonstrated with an example that is based on real data of a major financial services provider. Collapse

Topics: business process management productivity outsourcing offshoring

Methods: simulation optimization model Monte Carlo simulation descriptive statistic leading question

Theories: financial theory

Risk Statement Recognition in News Articles

2009 | International Conference on Information Systems | Citations: 0

Authors: Lu, Hsin-Min; Huang, Nina Wan-Hsin; Li, Shu-Hsing; Chen, Tsai-Jyh

Abstract: Textual data are an important information source for risk management for busines ... Expand

Abstract: Textual data are an important information source for risk management for business organizations. To effectively recognize, extract, and analyze risk-related statements in textual data, these processes need to be automated. We developed a design framework for firm-specific risk statements guided by previous economic, managerial, and natural language processing research. Four information types (risk impact, risk type, future timing, and uncertainty) were identified as the key requirements for risk recognition systems. A prototype system, AZRisk, was constructed to verify the framework. Evaluation using news sentences from the Wall Street Journal confirmed the design framework. The performance of AZRisk showed promising results for automated risk recognition. Collapse

Topics: organizational value risk management spreadsheet information retrieval

Methods: machine learning logistic regression support vector machine design framework elastic net regression

Theories: financial theory probability theory