scholarly journals Empirical Analysis of Joint Impact of Enterprise Risk Management and Corporate Governance on Firm Value

2018 ◽  
Vol 1 (1) ◽  
pp. 34-50 ◽  
Author(s):  
Ananth Rao
Keyword(s):  
Risk Management ◽  
Corporate Governance ◽  
Firm Value ◽  
Positive Impact ◽  
Gulf Cooperation Council ◽  
Shareholder Wealth ◽  
Enterprise Risk Management ◽  
System Modelling ◽  
Enterprise Risk ◽  
The Impact

This paper analyzes simultaneity and endogeneity of ERM and Corporate Governance. It assesses quantitative relationship between Corporate Governance, ERM and value of the firm. The research results provide quantitative justifications for the boards to make investments in ERM and Corporate Governance initiatives for improved shareholder wealth.  3SLS-IV system modelling was applied on 2004-11 data of Gulf Cooperation Council financial institutions. Our research confirms the simultaneity and endogeneity of Corporate Governance, ERM and Firm Value determinants. Firm value is jointly and positively impacted by ERM & Corporate Governance initiatives although the impact was less significant. Unexpectedly, ERM initiative was significantly and negatively impacted by determinants such as intangibility, and profitability. Firm size was the only determinant that showed significant and positive impact on firm value. Relative to UAE the corporate governance mechanism was active in Bahrain, Saudi Arabia, Kuwait and Oman firms. Further, the existence of audit committees in the GCC firm’s boards and ERM adoption significantly positively impacted the corporate governance by 3.42% and 1.7239% respectively. Keywords: Corporate Governance, Enterprise Risk Management, Firm Value, Simultaneity, Endogeneity, Gulf Cooperation Council (GCC) economies. JEL codes: C15, C21, C51, D57, F30, G21, G32, G34, K22, L21, M31, M41, N25, O16

scholarly journals The Impact of the Adoption of Enterprise Risk Management on the Industrial Financial Performance

2017 ◽  
Vol 6 (6) ◽  
pp. 9-20
Author(s):  
Kingsley Karunaratne Alawattegama
Keyword(s):  
Risk Management ◽  
Firm Performance ◽  
Firm Value ◽  
Positive Impact ◽  
Value Relevance ◽  
Secondary Data ◽  
Enterprise Risk Management ◽  
Integrated Framework ◽  
Enterprise Risk ◽  
The Impact

Enterprise risk management (ERM) has gained an increased attention during the recent past as an integrated approach to manage risk for creating and preserving firm value. The objective of this study is to explore and empirically verify as to whether the adoption of the ERM has an impact on the firm performance. This study uses both primary and secondary data pertaining to 129 companies listed on the Colombo Stock Exchange under the banking & finance, insurance, diversified, manufacturing, food and beverage and chemical and pharmaceutical sectors. Primary and secondary data are collected by distributing a survey questionnaire and analyzing the published financial statements of the observing companies. Researcher adopts ERM integrated framework suggested by the committee of sponsoring organization (COSO) of the Treadway Commission of the USA to assess the value relevance of ERM and uses return on equity (ROE) as a proxy to measure the firm performance. This study finds, except for control activities, none of the key ERM functions, suggested by the COSO’s ERM integrated framework, has a significant impact on the performance of listed companies. Internal environment, objective setting, and information & communication indicated a weak positive impact on the firm performance. Nevertheless, none of those impacts were statistically significant. Empirical evidence reveals that firms’ risk responding strategies have no impact on the performance. Surprisingly, monitoring of ERM functions has weak negative, but not significant, impact on the firm performance. These findings are contradictory with the theoretical expectation that the adoption of ERM practices has a positive impact on firm performance as confirmed by the prior researchers.

scholarly journals The Impact of Enterprise Risk Management on Firm Performance: Evidence from Sri Lankan Banking and Finance Industry

2017 ◽  
Vol 13 (1) ◽  
pp. 225
Author(s):  
Kingsley Karunaratne Alawattegama
Keyword(s):  
Risk Management ◽  
Firm Performance ◽  
Firm Value ◽  
Positive Impact ◽  
Enterprise Risk Management ◽  
Integrated Framework ◽  
Banking And Finance ◽  
Finance Industry ◽  
Enterprise Risk ◽  
The Impact

This study explores the impact of the adoption of enterprise risk management (ERM) practices on firm performance. A sample of forty five banking and finance companies listed on the Colombo Stock Exchange (CSE) was selected for this study and uses both primary and secondary data for the empirical analysis. The extent of adoption of ERM practices was assessed by using the ERM integrated framework of committee of sponsoring organization (COSO) of the Treadway Commission of USA. Return on equity (ROE) is used as a proxy to measure the firm performance and uses multivariate regression analysis to assess the impact of key ERM functions on firm performance. This study finds none of the eight key ERM functions suggested by the COSO’s ERM integrated framework has a significant impact on firm performance. Event identifications, risk assessment, risk response and information & communication indicate a positive impact on firm performance. However, none of those impacts were significant. Surprisingly, empirical evidence reveals that objective setting; event identification, control activities and monitoring of ERM functions have a negative, but not significant, impact on the firm performance. These findings induce the corporate managers to pay a close attention to the cost-benefits considerations when designing and implementing ERM practices and not heavily relied upon and extensively invest on ERM as a vehicle for creating firm value.

Effect of Enterprise Risk Management on Firm Value: Empirical Evidence from Non-Financial Firms in Pakistan

GIS Business ◽  
1970 ◽  
Vol 13 (2) ◽  
pp. 15-28
Author(s):  
Nouman Nasir
Keyword(s):  
Risk Management ◽  
Firm Value ◽  
Positive Impact ◽  
Stock Exchange ◽  
Enterprise Risk Management ◽  
Least Square ◽  
Return On Equity ◽  
Financial Firms ◽  
Enterprise Risk ◽  
Ordinary Least Square Regression

This research examines the effect of enterprise risk management on firm value in Pakistan. Further, this study empirically examines company characteristics that establish the execution of an enterprise risk management system. Using a sample of final dataset of 83 non-financial firms located in Pakistan. The sample included non-financial firms from the year 1999 to 2015 and so up to seventeen observation years per company. As in context of Pakistan, most of the organizations are already implement an ERM programs and establish specialized ERM departments because the ERM is now a global term and has become increasingly relevant because of the growing difficulty of risk and an additional development of regulatory frame works. For the empirical evidences, data collected from non-financial firms listed at the Pakistan Stock Exchange (PSX). Results of logistic regression shows that Capital Opacity, Profitability, Financial Leverage, Firm Size and Slack have positive impact on the implementation of an ERM system but Industrial diversification, Industry and Return on Equity are negatively related to an ERM engagement. The results of ordinary least square regression finds positive relationship between use of an ERM and firm value.

scholarly journals IMPACT OF GOOD CORPORATE GOVERNANCE TOWARDS CORPORATE VALUE WITH ENTERPRISE RISK MANAGEMENT AS MODERATING VARIABLE (EMPIRICAL STUDY OF FINANCIAL COMPANIES LISTED IN IDX FOR THE PERIOD 2017-2019)

2021 ◽  
Vol 13 (1) ◽  
pp. 74-98
Author(s):  
Lydia Sibarani ◽  
Herlina Lusmeida
Keyword(s):  
Risk Management ◽  
Corporate Governance ◽  
Audit Committee ◽  
Enterprise Risk Management ◽  
Managerial Ownership ◽  
Corporate Value ◽  
Good Corporate Governance ◽  
Enterprise Risk ◽  
Multiple Regression Method ◽  
The Impact

Abstract- This research aims to observe and analyze the impact of Good Corporate Governance towards Corporate Value as well as analyzing whether Enterprise Risk Management is able to moderate its impact. Good Corporate Governance is proxied by the presence of Independent Commissioners, Audit Committee, as well as Managerial Ownership. The population of this research includes all financial companies that publish their annual report in Bursa Efek Indonesia (BEI) over the period of 2017-2019. Data were analyzed using the multiple regression method and the moderated regression analysis. The result of this research found that Independent Commissioners and Audit Committee gives positive and significant impact towards Corporate Value while Managerial Ownership gives negative and insignificant impact towards Corporate Value. Enterprise Risk Management is not able to moderate the impact of Independent Commissioner and Managerial Ownership towards Corporate Value but is able to moderate the impact of the Audit Committee towards Corporate Value. Keywords: Audit Committee; Corporate Value; Corporate Governance; Independent Commissioner; Managerial Ownership

scholarly journals The Effectiveness of Enterprise Risk Management and Internal Audit Function on Quality of Financial Reporting in Universities

2017 ◽  
Vol 9 (4(J)) ◽  
pp. 230-241
Author(s):  
Wadesango N ◽  
Mhaka C.
Keyword(s):  
Risk Management ◽  
Corporate Governance ◽  
Financial Reporting ◽  
Internal Audit ◽  
Enterprise Risk Management ◽  
State Universities ◽  
Internal Audit Function ◽  
Enterprise Risk ◽  
The Impact

This study examined the impact of enterprise risk management (ERM) and internal audit function (IAF) on the financial reporting quality (FRQ) of state universities in Zimbabwe. Utilizing a dataset of 250 respondents from across nine (9) state universities, the researchers examined the effectiveness of ERM and the IAF on the quality of financial reporting in state universities. The researchers employed the contingency theory and studied each university separately to report on items that are specific to each and then also establish a commonality in the definition of parameters to be used in setting up the benchmark against which future performance may be measured. The findings were that there is a strong and significant relationship between ERM and the FRQ and also that there is a positive relationship between the internal audit function and FRQ. Quality internal audit results improved corporate governance systems. The results also underscore the significance and need for central government to establish and monitor a system of good ERM processes that minimize corporate governance breaches and enhance integrity and independence in financial reporting in state universities.

scholarly journals Enterprise Risk Management, Insurer Value Maximisation, and Market Frictions

2008 ◽  
Vol 38 (01) ◽  
pp. 293-339 ◽  
Author(s):  
Shaun Yow ◽  
Michael Sherris
Keyword(s):  
Risk Management ◽  
Financial Distress ◽  
Firm Value ◽  
Enterprise Risk Management ◽  
Market Imperfections ◽  
Demand Elasticity ◽  
Value Maximization ◽  
Enterprise Risk ◽  
Financial Quality ◽  
The Impact

Enterprise risk management has become a major focus for insurers and reinsurers. Capitalization and pricing decisions are recognized as critical to firm value maximization. Market imperfections including frictional costs of capital such as taxes, agency costs, and financial distress costs are an important motivation for enterprise risk management. Risk management reduces the volatility of financial performance and can have a significant impact on firm value maximization by reducing the impact of frictional costs. Insurers operate in imperfect markets where demand elasticity of policyholders and preferences for financial quality of insurers are important determinants of capitalization and pricing strategies. In this paper, we analyze the optimization of enterprise or firm value in a model with market imperfections. A realistic model of an insurer is developed and calibrated. Frictional costs, imperfectly competitive demand elasticity, and preferences for financial quality are explicitly modelled and implications for enterprise risk management are quantified.

scholarly journals Effect of Free Cash Flow, Enterprise Risk Management Disclosure and Sustainability Report on Company Value With Corporate Governance as Moderating Variable

SENTRALISASI ◽  
2021 ◽  
Vol 10 (2) ◽  
pp. 140
Author(s):  
Nur Aeni Waly ◽  
Noer Sasongko ◽  
Fatchan Achyani
Keyword(s):  
Risk Management ◽  
Corporate Governance ◽  
Cash Flow ◽  
Firm Value ◽  
Enterprise Risk Management ◽  
Free Cash Flow ◽  
Good Corporate Governance ◽  
Enterprise Risk ◽  
The Relationship ◽  
Sustainability Report

This study aims to analyze the effect of free cash flow, enterprise risk management disclosure, and sustainability report on the value of companies with good corporate governance as a moderating variable listed on the Jakarta Islamic Index companies during the 2015-2019 periods. The samples used were 57 companies in (JII) period 2015 – 2019. The data analysis method used is multiple regressions with the help of Spss 26 to analyze the moderating effect. The results of this analysis show that free cash flow has no effect on firm value, enterprise risk management disclosure does not affect firm value, sustainability report does not has an effect on firm value, and good corporate governance does not moderate the relationship between free cash flow and firm value, good corporate governance moderates the relationship between enterprise risk management disclosure on firm value, and good corporate governance does not affect firm value. moderation of the relationship between the sustainability report and the value of the company.

scholarly journals The Effectiveness of Enterprise Risk Management and Internal Audit Function on Quality of Financial Reporting in Universities

2017 ◽  
Vol 9 (4) ◽  
pp. 230
Author(s):  
Wadesango N ◽  
Mhaka C.
Keyword(s):  
Risk Management ◽  
Corporate Governance ◽  
Financial Reporting ◽  
Internal Audit ◽  
Enterprise Risk Management ◽  
State Universities ◽  
Internal Audit Function ◽  
Enterprise Risk ◽  
The Impact

This study examined the impact of enterprise risk management (ERM) and internal audit function (IAF) on the financial reporting quality (FRQ) of state universities in Zimbabwe. Utilizing a dataset of 250 respondents from across nine (9) state universities, the researchers examined the effectiveness of ERM and the IAF on the quality of financial reporting in state universities. The researchers employed the contingency theory and studied each university separately to report on items that are specific to each and then also establish a commonality in the definition of parameters to be used in setting up the benchmark against which future performance may be measured. The findings were that there is a strong and significant relationship between ERM and the FRQ and also that there is a positive relationship between the internal audit function and FRQ. Quality internal audit results improved corporate governance systems. The results also underscore the significance and need for central government to establish and monitor a system of good ERM processes that minimize corporate governance breaches and enhance integrity and independence in financial reporting in state universities.

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