Abstract

This research studied the effect of investments in enterprise resource planning (ERP), supply chain management (SCM) systems on a firm’s long-term stock price performance and profitability measures such as return on assets and return on sales. The results are based on a sample of 558 announcements of ERP implementations, 420 SCM implementations. Our analysis of the financial benefits of these implementations gives mixed results. In the case of ERP systems, we observed some evidence of improvements in profitability but not in stock returns. The results for improvements in profitability are stronger in the case of ERP systems. On average, adopters of SCM system have positive stock returns, as well as improvements in profitability. Although our results are not uniformly positive across the different enterprise systems (ES), they are encouraging, despite the high implementation costs. This should make less help to concerns that some have expressed about the viability of ES, given the highly publicized implementation problems at some firms.

Key words: Enterprise resource planning (ERP) and supply chain management (SCM).