The Impact of Information System Quality on the Organizational Effectiveness and the Financial Reporting Quality

Abstract

The purpose of this research is to assess the contribution of information system quality to organizational effectiveness and financial reporting quality prepared by commercial banks in Bangladesh. For this purpose, a survey is conducted to gather information from 240 people by purposefully sampling method about their experiences in information system quality, the effectiveness of their organization, and the financial reporting quality using a five-point Likert scale, where 1 represents strongly disagreeing and 5 represents strongly agreeing. Respondents were chosen from major stakeholders who prepare financial reports, and design Information Systems to collect data on the reports and the users of reports so that the perfect reflection is ensured free from biases. To find the factors and check them with Cronbach's alpha, we create a Principal Component Analysis (PCA) with IBM SPSS Statistics 26. A Structure Equation Model (SEM) is developed as information system quality is selected as an exogenous variable, organizational effectiveness, and financial reporting quality as an endogenous variable with IBM SPSS AMOS 22. Finally, the Average Variance Expected (AVE) to test convergent validity, Maximum Shared Variance (MSV) to test the discriminant validity and model validity is calculated for the selected information system SEM model. The research study observes that information system quality should have a significant contribution to organizational effectiveness. Also, the quality of information systems should make a significant contribution to the quality of financial reporting in Bangladesh. So, the commercial bank's authority may pay attention to creating a quality full information system, which may contribute to making the organization effective. Also, the research findings may be utilized in strategy formation and policymaking in the improvement of quality information systems to prepare the financial report for effective decision-making in commercial banks of Bangladesh.