ERP value: the market response to announcements of enterprise resource planning investments

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Publication Type thesis
School or College David Eccles School of Business
Department Finance
Author Case, Jacob Craig
Title ERP value: the market response to announcements of enterprise resource planning investments
Date 2009-05
Description This paper evaluates the change in a firm's equity value as a result of the firm announcing that it plans to integrate its operations with an enterprise resource planning (ERP) system, or a module of an ERP system. Investments in Information Systems (IS) are increasing as firms strive to optimize their business processes, and have become one of the largest categories of capital expenditures of U.S. businesses. There is a growing body of research based on evaluating the effects of such IT investments and their contribution to firm value. Using an event study approach, the event being the public announcement of ERP investment, and the measure being the change in stock price, we evaluate if ERP investments increase value for firms. Based on a sample of 89 firms publicly traded in U.S. stock markets during the period between 1999 and 2008, we conclude that ERP investments create an average of .81% (? significance = 0.05) incremental value for firms. We consider typical ERP component systems, and observe that supply chain management (SCM) systems are not rewarded with higher abnormal returns than non-SCM, but observe abnormally high amounts of positive compared to negative returns (normal asymmetry sign test, ? = 0.01). We examine ERP investments from well known vendors with established reputations in the market, and find that contract announcements with such vendors enjoy abnormal stock market returns of 1.40% (? = 0.01). We then look at firm function, and find that although manufacturing firms gain value (? = 0.05), that non-manufacturing firms do as well (? = 0.10). We evaluate firm size and financial health as attributes that contribute to ERP value and find that both large firms as well as financially healthy firms are rewarded incremental value by the market (? = 0.01). We also consider time period, and find that firms that engaged in post-2005 ERP investments gain significantly more than pre-2005 investments (? = 0.01). Finally, we consider firm and ERP system attributes as independent variables that may contribute to increased firm value as the dependent variable. The paper concludes with discussion about various considerations regarding the potential value created by ERP investments.
Type Text
Publisher University of Utah
Subject Business planning; Management information systems
Dissertation Institution University of Utah
Dissertation Name Honors BS
Language eng
Relation is Version of Digital reproduction of "ERP value: the market response to announcements of enterprise resource planning investments" J. Willard Marriott Library Special Collections HG139.5 2009 .C37
Rights Management © Jacob Craig Case, To comply with copyright, the file for this work may be restricted to The University of Utah campus libraries pending author permission.
Format Medium application/pdf
Format Extent 73,860 bytes
Identifier us-etd2,149355
Source Original: University of Utah J. Willard Marriott Library Special Collections
Conversion Specifications Original scanned on Epson GT-30000 as 400 dpi to pdf using ABBYY FineReader 9.0 Professional Edition.
ARK ark:/87278/s6280p79
Setname ir_etd
Date Created 2012-04-23
Date Modified 2012-04-23
ID 193762
Reference URL