The Effects of Implementing Enterprise Resource Planning Systems on Accounting Information: Bangladesh Perspective

Abstract

The use of Information Technology (IT) including Enterprise Resource Planning (ERP) in the corporate arena is increasing all over the world during the last few decades. Bangladesh is no exception to this. ERP is in use in the most of the giant and multi-national companies in Bangladesh. Many of the benefits of ERP are yet to be explored by the managers in Bangladesh. Moreover, implementing such ERP-enabled software is expensive and time-consuming. This study ultimately has shed light on the issue–How ERP implementations in corporate sectorsaffect decision usefulness of accounting information in the context of Bangladesh. Decision usefulness of accounting information depends on the fundamental qualities of accounting information. Two fundamental qualities of accounting information, i.e., faithful representation and relevance (predictive and feedback values) along with the enhancing qualitative characteristics including verifiability and timeliness have been focused in the study. The study is exploratory and the researcher’s survey-based list of ERP-adopting firms has been treated as a sampling frame. Since the ready-made sampling frame of the ERP-adopting firms is not available, a survey has been undertaken through telephone-interview using the phone numbers mentioned in the address-database of the listed entities published by the Dhaka Stock Exchange (DSE) in their monthly publications and available in the DSE’s website. During July-December 2011, the researcher contacted all the listed firms (enlisted with DSE up to December 2010) through telephone calls and found 65 firms that are ERP-enabled. Out of 65 ERP-enabled firms, 37 firms have adopted ERP partially. The remaining 28 firms have adopted full version of ERP. Since December 2011, out of these 28 firms, the number of non-financial firms that have adopted full modules of ERP was 14.The researcher applied purposive sampling technique. Finally, 7 firms were selected as the sample unit. These 7 firms were all non-financial ERP-adopters. The researcher has also taken 7 other non-ERP firms as “control” with a view to comparing the effects of ERP implementation on accounting information across ERP-adopting and non-adopting firms.For applying statistical tools, data on selected variables have been taken for a period of 16 years from 1995-96 to 2010-11 in case of financial year or from 1996 to 2011 in case of calendar year. Thus the sample size for data on selected variables for 7 ERP-adopting firms is 104 firm-years and that for 7 control firms (ERP non-adopting firms) is 77 firm-years. As shown above in the table, due to non-availability of data, the sample size for some variables is reduced (which is minimum 85 for ERP-adopting firms, and 69 for control firms). The present study was conducted on the non-financial firms enlisted with DSE as on December 2011 that adopted ERP-based software. The study used both primary and secondary data. The secondary data have been collected from the published annual reports of different listed companies (enlisted with DSE). The primary data have been collected through sending a close-ended structured questionnaire through e-mail.The questionnaire covered six qualitative characteristics of accounting information through 25 statements for measuring through 5-point Likert scale. The collected data were analyzed using different statistical tools like descriptive statistics (mean, standard deviation, percentage of frequency distribution etc.), standard multiple regressions, coefficient of determination, chi-square test, auto regression, independent sample t-test, one way sample t-test and ANOVA. The data were processed in micro computer using Statistical Packages for Social Sciences (SPSS). The findings of the study indicate that ERP implementations in the respective firms decrease faithful representation,which supported the existing literature. The findings of the study further reveal that ERP usage increases relevance with respect to feedback value of accounting information. It is also found that ERP usage increases relevance with respect to predictive value. But it is observed that ERP usage does not increase timeliness of reporting. The reporting lag between the ERP –adopting firms and the non-adopting firms are mathematically significant but statistically not significant. Three significant findings merit attention. Firstly, ERP implementation does not affect faithful representation (modified Jones model) whereas faithfulness of the accounting information is declined on ERP adoption as per extended modified Jones model supporting the finding of the opinion survey and the existing literature. Secondly, it is evident from the study that ERP implementations encourage earnings management. Thirdly, ERP implementation increases relevance with respect to predictive value and feedback value but not with respect to timeliness. The reporting lag is not significantly declined on ERP implementation.