The Impacts of Enterprise Resource Planning Systems on Firm Performance: An Empirical Analysis of Chinese Chemical Firms

Chinese firms heavily invest in enterprise resource planning systems (ERP) in recent years and expect that ERP can help them gain superior financial performance. Given the high costs and high risk of ERP investments, to quantify the financial benefits of ERP implementation is an important research issue. This paper empirically examines the impacts of ERP implementation on firm performance using the financial data from 50 Chinese chemical firms that implemented ERP. The firms’ abnormal performance during the two-year implementation period and three-year post-implementation period was analyzed based on the guideline of Barber et al. on event studies. The results find no significant performance improvement during the implementation period and the three-year post-implementation period and a decline in performance in the first two years after implementation. However, a slight performance improvement in the third year after implementation may indicate that the financial benefits of ERP may show after a long-term ERP use. These results provide insight for Chinese firms that want to invest in ERP.