Enterprise Resource Planning & Non-Financial Performance Incentives: The Joint Impact on Corporate Performance

36 Pages Posted: 19 May 2005

See all articles by Benson Wier

Benson Wier

Virginia Commonwealth University

James E. Hunton

Bentley University - Department of Accountancy; Erasmus University

Hassan R. Hassabelnaby

University of Toledo - Department of Accounting

Abstract

Some research suggests that the implementation of enterprise resource planning (ERP) systems improves corporate performance (Hayes et al. 2001; Hunton et al. 2003) while other research indicates that the inclusion of non-financial performance incentives (NFPI) in executive compensation contracts also enhances performance (HassabElnaby et al. 2004). Since ERP systems are designed to capture key performance indicators that are both financial and non-financial in nature, the primary research question examined herein asks: Does the joint adoption of ERP and the use of NFPI yield a synergistic effect on corporate performance? In the current study, performance is reflected by return on assets (ROA) and return on stocks (ROS). Overall, study results indicate that the combined use of ERP and NFPI yields significantly higher (1) short-term and long-term ROA and ROS than ERP-only firms, and (2) short-term ROA and ROS and long-term ROS than NFPI-only firms. Research findings offer valuable insights into the theoretical and practical implications of jointly adopting ERP and NFPI.

Keywords: Enterprise resource planning, non-financial performance measures, executive compensation contracts, corporate performance

Suggested Citation

Wier, Benson and Hunton, James E. and Hassabelnaby, Hassan R., Enterprise Resource Planning & Non-Financial Performance Incentives: The Joint Impact on Corporate Performance. AAA Management Accounting Section 2006 Meeting Paper. Available at SSRN: https://ssrn.com/abstract=722446 or http://dx.doi.org/10.2139/ssrn.722446

Benson Wier (Contact Author)

Virginia Commonwealth University ( email )

School of Business 301 W. Main St.
Richmond, VA 23284
United States
804-828-7162 (Phone)
804-828-8884 (Fax)

James E. Hunton

Bentley University - Department of Accountancy ( email )

175 Forest Street
Waltham, MA 02452
United States

Erasmus University

Rotterdam
Netherlands

Hassan R. Hassabelnaby

University of Toledo - Department of Accounting ( email )

Toledo, OH 43606
United States

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