The Effects of ERP Systems Investments on Market Value of Firms

The objective of this study is to investigate the effects of ERP systems investments on market value of firms. Drawing upon organizational integration theory and prior empirical studies, we test the market value of ERP systems announcements with an event study, and further investigate three ERP contingent variables including outsourcing, implementation, and popular packages. Based on a sample of 46 ERP systems announcements in U.S. firms over 2005 to 2011 year, we find that announcements of ERP systems investments result in positive market value. We also find that investors reward more outsourcing deployment of ERP systems than direct deployment of them. Upgrading ERP systems increases more market value than adopting ERP systems from the outset. Furthermore, we find that popular ERP packages such as SAP produce higher market value than unpopular packages. These findings support for organizational integration theory and provide implications for managers whose firms have not enough IT resources to rely on outsourcing ERP systems and popular ERP packages.