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The Impact of ERP Implementation the Announcement on the Market Value of the Firm  

Bang, Jong-Wook (한국기업평가 컨설팅)
Kim, Joon-S. (연세대학교 경영학과)
Lee, Moon-Bong (동의대학교 경영정보학부)
Kim, Sung-Hwan (LG 경제연구원 산업연구센터)
Publication Information
Asia pacific journal of information systems / v.12, no.1, 2002 , pp. 87-101 More about this Journal
Abstract
In the past few years, many Korean companies have implemented various ERP systems. Despite the enormous efforts and costs, however, there have been doubts about the effectiveness of ERP implementation. The purpose of this study is to identify whether the announcement of ERP implementation affects the market value of the firm. To achieve the research objective, event-study methodology was used assessing the cumulative abnormal returns(CARs) for 33 firms' announcements of ERP investments. Findings of the study are summarized as follows: First, the announcements of ERP implementation have no effect on the firm value though the sign is negative. Second, there is marginally significant difference in the market value of the firm between the first mover of ERP implementation and its followers. In order to figure out any possible reasons of such unexpected results, several investors and fund managers of major investment firms were interviewed. They reached the two agreements that ERP hardly increases the firm value. One was mainly due to the misfit between the foreign business processes built in the ERP systems and Korean firms' traditional business processes. The other was the possibility of financial deterioration caused by substantial costs for ERP implementation.
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