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Outsourcing accounting information systems: Evidence from closed-end mutual fund families

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  • Cullinan, Charles P.
  • Zheng, Xiaochuan

Abstract

This study examines the factors associated with the decision of closed-end funds to outsource their accounting information systems. Using data from 2010 and 2011, we find that the outsourcing decision is made by groups of funds with common service providers (called “fund families”), rather than by individual funds. Our results indicate that fund families containing a larger number of funds and older fund families are less likely to outsource their accounting functions. These types of fund families may have greater internal economies of scale, diminishing the potential cost savings from outsourcing. We also find that fund families with more good-faith-valued assets are less likely to outsource accounting information systems than those with more market-valued assets. Valuing these good-faith-valued assets is both an important investment-management process and a key accounting task, reducing the need to outsource accounting to focus managers on their core competency. This study is of potential importance to investors and regulators in evaluating closed-end funds' decisions on outsourcing accounting functions.

Suggested Citation

  • Cullinan, Charles P. & Zheng, Xiaochuan, 2015. "Outsourcing accounting information systems: Evidence from closed-end mutual fund families," International Journal of Accounting Information Systems, Elsevier, vol. 17(C), pages 65-83.
    • Handle: RePEc:eee:ijoais:v:17:y:2015:i:c:p:65-83
    DOI: 10.1016/j.accinf.2014.06.004
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    References listed on IDEAS

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    1. Beasley, Mark & Bradford, Marianne & Dehning, Bruce, 2009. "The value impact of strategic intent on firms engaged in information systems outsourcing," International Journal of Accounting Information Systems, Elsevier, vol. 10(2), pages 79-96.
    2. Patricia Everaert & Gerrit Sarens & Jan Rommel, 2010. "Using Transaction Cost Economics to explain outsourcing of accounting," Small Business Economics, Springer, vol. 35(1), pages 93-112, July.
    3. Peter Carey & Nava Subramaniam & Karin Chua Wee Ching, 2006. "Internal audit outsourcing in Australia," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 46(1), pages 11-30, March.
    4. Premuroso, Ronald F. & Skantz, Terrance R. & Bhattacharya, Somnath, 2012. "Disclosure of outsourcing in the annual report: Causes and market returns effects," International Journal of Accounting Information Systems, Elsevier, vol. 13(4), pages 382-402.
    5. Martin Cherkes & Jacob Sagi & Richard Stanton, 2009. "A Liquidity-Based Theory of Closed-End Funds," The Review of Financial Studies, Society for Financial Studies, vol. 22(1), pages 257-297, January.
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