The Determinants of Enterprise Risk Management: Evidence From the Appointment of Chief Risk Officers

André P. Liebenberg and Robert E. Hoyt

Risk Management and Insurance Review, 2003, vol. 6, issue 1, 37-52

Abstract: Enterprise risk management (ERM) has captured the attention of risk management professionals and academics worldwide. Unlike the traditional “silo‐based” approach to corporate risk management, ERM enables firms to benefit from an integrated approach to managing risk that shifts the focus of the risk management function from primarily defensive to increasingly offensive and strategic. Despite the heightened interest in ERM, little empirical research has been conducted on the topic. This study provides an initial attempt at identifying the determinants of ERM adoption. We construct a sample of firms that have signaled their use of ERM by appointing a Chief Risk Officer (CRO) who is charged with the responsibility of implementing and managing the ERM program. We use a logistic regression framework to compare these firms to a size‐ and industry‐matched control sample. While our results suggest a general absence of differences in the financial and ownership characteristics of sample and control firms, we find that firms with greater financial leverage are more likely to appoint a CRO. This finding is consistent with the hypothesis that firms appoint CROs to reduce information asymmetry regarding the firm's current and expected risk profile.

Date: 2003
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (96)

Downloads: (external link)
https://doi.org/10.1111/1098-1616.00019

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:rmgtin:v:6:y:2003:i:1:p:37-52

Access Statistics for this article

Risk Management and Insurance Review is currently edited by Mary A. Weiss

More articles in Risk Management and Insurance Review from American Risk and Insurance Association
Bibliographic data for series maintained by Wiley Content Delivery ().