Exploring the indirect links between enterprise risk management and the financial performance of SMEs

Lenka Syrová () and Jindřich Špička ()
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Lenka Syrová: Prague University of Economics and Business
Jindřich Špička: Prague University of Economics and Business

Risk Management, 2023, vol. 25, issue 1, No 1, 27 pages

Abstract: Abstract This paper responds to the lack of empirical evidence on how enterprise risk management (ERM) and the financial performance of small and medium-sized enterprises (SMEs) are related. Structural equation modeling is used to explore new mediators in the relationship between ERM and SME financial performance. The results show that organizational culture (mission dimension) and strategic risk management performance are full and positive mediators between ERM and financial performance. These research results highlight the fact that the implementation of ERM in an enterprise does not by itself generate the expected effects without the existence of a mature organizational culture and the monitoring of strategic risk management performance. These findings are particularly relevant for SMEs with “pretend ERM” that lacks the strategic and operational components. ERM also helps to transform the negative effect of foreign capital in SME equity on financial performance into a positive effect.

Keywords: Enterprise risk management; SMEs; Structural equation modeling; Organizational culture; Strategic risk management performance (search for similar items in EconPapers)
JEL-codes: G32 M14 M20 (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1057/s41283-022-00107-9

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