Information technology capability and financial reporting quality in local governments: the mediating role of accounting information system quality

Key findings from this study

This research indicates that:

• IT capability significantly influences financial reporting quality through both direct pathways and system-mediated mechanisms in local government contexts.
• Accounting information system quality represents the most critical determinant of financial reporting quality among examined variables.
• IT capability effects depend on integration through effective accounting systems rather than technology and human resources functioning independently.

Overview

This study investigates the relationships among information technology capability, accounting information system quality, and financial reporting quality within Indonesian local government contexts. The research integrates Resource-Based View, Dynamic Capability Theory, and Information System Success Model frameworks. Survey data from 735 public sector employees underwent analysis via Partial Least Squares Structural Equation Modeling.

Methods and approach

The study employed survey methodology targeting public sector employees in Indonesian local governments. Researchers collected data from 735 respondents and analyzed relationships among variables using PLS-SEM. The analytical approach enabled assessment of both direct effects and mediating mechanisms within the proposed framework.

Results

IT capability, comprising government commitment alongside individual IT competence and knowledge, significantly enhanced both AIS quality and financial reporting quality. AIS quality emerged as the primary driver of reporting outcomes. The mediation analysis revealed that AIS quality functioned as a critical linking mechanism between IT capability and financial reporting improvements, indicating that technology and human resources produce stronger effects when integrated through accounting systems rather than operating independently.

Implications

These findings suggest that policymakers must approach financial reporting quality improvements as a systems integration challenge rather than isolated technology or workforce investments. Strengthening digital capacity requires parallel development of organizational commitment, individual competencies, and accounting system infrastructure. Local governments seeking enhanced accountability should prioritize investments that coordinate technological infrastructure with human capability development through effective accounting systems.

Scope and limitations

This summary is based on the study abstract and available metadata. It does not include a full analysis of the complete paper, supplementary materials, or underlying datasets unless explicitly stated. Findings should be interpreted in the context of the original publication.