Financial Analysis of Potential Benefits from ERP Systems Adoption

The Journal of Business and Information Technology, Vol. 2, Issue 1, pp. 40-50, Spring 2003

Posted: 25 Feb 2009

See all articles by Andreas I. Nicolaou

Andreas I. Nicolaou

affiliation not provided to SSRN

Bruce Dehning

Chapman University - The George L. Argyros School of Business & Economics

Theophanis C. Stratopoulos

University of Waterloo - School of Accounting and Finance

Date Written: November 23, 2008

Abstract

Past research findings indicate that the successful adoption of information technology to support business strategy can help organizations gain superior financial performance versus their competitors. Adopting enterprise-wide resource planning systems is considered a strategic investment decision because it represents a significant commitment of resources and can have a dramatic effect on business processes. These strategic investments may also influence a firm's performance over a long-term time horizon. This study examines the effect of adoption of enterprise systems on a firm's operational performance. Financial data of companies adopting enterprise wide systems and of a matched control group of firms were compared cross-sectionally across time periods before and after adoption. The results from a multivariate analysis show that firms adopting enterprise systems exhibit a significantly higher overall differential performance since the second year after adoption than a matched control group. A decomposition of overall performance into profitability and efficiency financial indicators shows that significant differences attained by the ERP adopting firms are due to higher profitability but not efficiency.

Keywords: Financial Analysis, ERP

JEL Classification: M41, M15, O14

Suggested Citation

Nicolaou, Andreas I. and Dehning, Bruce and Stratopoulos, Theophanis C., Financial Analysis of Potential Benefits from ERP Systems Adoption (November 23, 2008). The Journal of Business and Information Technology, Vol. 2, Issue 1, pp. 40-50, Spring 2003. Available at SSRN: https://ssrn.com/abstract=1306202

Andreas I. Nicolaou

affiliation not provided to SSRN ( email )

Bruce Dehning (Contact Author)

Chapman University - The George L. Argyros School of Business & Economics ( email )

333 N. Glassell
Orange, CA 92866
United States

Theophanis C. Stratopoulos

University of Waterloo - School of Accounting and Finance ( email )

200 University Avenue West
Waterloo, Ontario N2L 3G1 N2L 3G1
Canada
519-888-4567 x35943 (Phone)

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