Enterprise resource planning systems and non-financial performance incentives: The joint impact on corporate performance

Benson Wier, James Hunton, Hassan HassabElnaby

Research output: Contribution to journalArticleResearchpeer-review

78 Citations (Scopus)

Abstract

Some accounting information systems research suggests that the implementation of enterprise resource planning (ERP) systems improves corporate performance [Hayes DC, Hunton JE, Reck JL. Market reaction to ERPS implementation announcements. J Inf Syst 2001;15(1): 3-18; Hunton JE, Lippincott B, Reck J. Enterprise resource planning systems: Comparing firm performance of adopters and nonadopters. Int J Account Inf Syst 2003;4:165-184], while a seemingly disparate line of managerial accounting research indicates that the inclusion of non-financial performance incentives (NFPI) in executive compensation contracts also enhances performance [Said AA, HassabElnaby HR, Wier, B. An empirical investigation of the performance consequences of non-financial measures. J Manage Account Res 2003;15:193-223]. Two theoretical perspectives tie together these research streams. Cybernetic control theory explains how ERP systems offer the means by which managers can effectively use non-financial performance indicators, and agency theory describes how NFPI provide the motive and opportunity for managers to attend to key non-financial performance indicators. The research hypothesis tested herein asserts that the joint adoption of ERP and use of NFPI will yield greater corporate performance than either ERP or NFPI alone. In the current study, performance is reflected by return on assets (ROA) and stock returns (SR). Study results support the hypothesis, as archival data indicate that firms with both NFPI and ERP obtain significantly higher short-term and long-term ROA and SR than either ERP-only or NFPI-only firms. Research findings offer valuable
Original languageEnglish
Pages (from-to)165 - 190
Number of pages26
JournalInternational Journal of Accounting Information Systems
Volume8
Issue number3
DOIs
Publication statusPublished - 2007
Externally publishedYes

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