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Can the implementation of enterprise resource planning systems reduce equity financing cost of enterprises?

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  • Zhang, Juanjuan
  • Zhou, Song
  • Ma, Fuhui

Abstract

We examine the impacts of ERP systems on equity financing cost from the dual perspectives of risk management and relative value creation based on corporate value maximization objectives. Using data manually collected from the listed companies in China, we find that enterprises with ERP systems have significantly higher equity financing cost. We addressed the endogeneity problems using the fixed effect, the two-stage least-squares regression (2SLS), and the Heckman two-stage regression. The underlying reasons for the result through mechanism analysis reveal that ERP systems can systematically and effectively enhance risk management levels and corporate value returns, bringing higher returns for investors and achieving a win-win situation. This result supports the investment-oriented role of the capital market and can help to resolve conflicts among its participants.

Suggested Citation

  • Zhang, Juanjuan & Zhou, Song & Ma, Fuhui, 2025. "Can the implementation of enterprise resource planning systems reduce equity financing cost of enterprises?," Finance Research Letters, Elsevier, vol. 84(C).
    • Handle: RePEc:eee:finlet:v:84:y:2025:i:c:s1544612325010402
    DOI: 10.1016/j.frl.2025.107782
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    1. Juanjuan Zhang & Song Zhou & Fuhui Ma, 2025. "Does ERP Implementation Lower Corporate Financing Costs? A Dual Perspective from Risk Management and Value Creation," Risks, MDPI, vol. 13(9), pages 1-34, August.

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