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A Principal-Agency Perspective on ERP Implementation Decisions
Jidong Zhang, Peking University
Liyan Wang, Peking University
Qing Liao, Ball State University
ABSTRACT. The decision of whether to implement an ERP system has long been regarded as part of corporation strategies. From the view of information resource sharing and communication, which is a critical characteristic of ERP, this paper investigates whether the decision of ERP implementation is affected by the principal-agency mechanism. Based on data from China’s capital market, we find evidence that Chinese companies try to solve principal-agency problems by implementing ERP. Chinese companies which implement ERP have lower shareholding percentages of management and greater distances between concentration of ownership and managerial ownership than those which do not implement ERP. We also find that ERP implementation decision is affected by different principal-agency problems. State-owned companies are more willing to implement ERP in order to solve the principal-agency problem.
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