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The Reaction of Financial Analysts to Enterprise Resource Planning (ERP) Implementation Plans

James E. Hunton

Bentley University - Department of Accountancy; Erasmus University

Ruth Ann McEwen

Suffolk University

Benson Wier

Virginia Commonwealth University

Journal of Information Systems, Spring 2002

This study investigates the extent to which investors believe that enterprise resource planning (ERP) systems enhance firm value by examining changes in financial analysts' earnings predictions before and after they receive an announcement that a firm plans to implement an ERP system. A total of 63 analysts participated in a two (firm size: small and large) by two (firm health: unhealthy and healthy) randomized between-subjects design. The ERP announcement represented a within-subjects manipulation. The analysts' overall reaction to ERP implementation plans was positive, as mean post-announcement earnings forecasts were significantly higher than mean pre-announcement forecasts. Additionally, as expected, mean earnings forecast revisions in the small/healthy and large/unhealthy firm conditions were significantly greater than mean forecast revisions in the small/unhealthy firm condition. Experimental results from the current study support archival findings reported by Hayes et al. (2001), who explored the same research questions, among others, by examining cumulative abnormal returns surrounding ERP announcements.

Triangulation studies of this nature using multi-methods (e.g., behavioral versus archival) and complementary criterion variables (e.g., earnings forecasts versus cumulative abnormal returns) are important to social scientists, as they provide insight into the reliability, consistency and validity (both internal and ecological) of proposed theoretical relationships (Boyd et al. 1993; Flick 1992; Libby et al. 2001).

Number of Pages in PDF File: 25

Keywords: enterprise resource planning, ERP, investors, financial analysts, triangulation

JEL Classification: G12, G29, M41

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Date posted: March 18, 2002  

Suggested Citation

Hunton, James E. and McEwen, Ruth Ann and Wier, Benson, The Reaction of Financial Analysts to Enterprise Resource Planning (ERP) Implementation Plans. Journal of Information Systems, Spring 2002. Available at SSRN: http://ssrn.com/abstract=302826 or http://dx.doi.org/10.2139/ssrn.302826

Contact Information

James E. Hunton (Contact Author)
Bentley University - Department of Accountancy ( email )
175 Forest Street
Waltham, MA 02452
United States
Erasmus University
Ruth Ann McEwen
Suffolk University ( email )
Frank Sawyer School of Management 8 Ashburton Place
Boston, MA 02108
United States
Benson Wier
Virginia Commonwealth University ( email )
School of Business 301 W. Main St.
Richmond, VA 23284
United States
804-828-7162 (Phone)
804-828-8884 (Fax)
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