Organizational centralization of accounting functions and forward-looking disclosure quality: evidence from financial shared service centers

This paper examines how the organizational centralization of accounting functions, an underexplored element of firms' reporting infrastructure, relates to the quality of forward-looking disclosures. Using novel hand-collected data on financial shared service center (FSSC) adoption among Chinese A-share listed firms, we document a robust and positive association between FSSC adoption and the accuracy of management earnings forecasts. These forecasts are also more specific, and capital markets react more strongly to them. Further analyses show that FSSC adoption is associated with shorter audit report lags and fewer subsequent financial restatements. The association between FSSC adoption and forecast accuracy is also stronger among firms with greater internal information frictions. These findings are consistent with the view that FSSCs improve managers' access to timely and reliable accounting information, thereby supporting more accurate forecasts. We also find that FSSC effectiveness is stronger among firms with greater digital capabilities and a stronger culture of unity, as well as among more mature FSSCs and those operating under multi-center structures. Our findings add to the literature on reporting infrastructure and disclosure quality and offer insights for firms and policymakers considering FSSC adoption as part of digital transformation strategies.