Analysis on the Efficiency of Risk Management in the Chinese Listed Companies

Chien-Ming Huang, Wei Yang and Ren-Qing Zeng
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Chien-Ming Huang: Department of Banking and Finance, Tamkang University, New Taipei City 251301, Taiwan
Wei Yang: School of Business, East China University of Science and Technology, 130 Meilong Road, Shanghai 200237, China
Ren-Qing Zeng: Department of International Business, Soochow University, Taipei 111002, Taiwan

Mathematics, 2020, vol. 8, issue 10, 1-13

Abstract: Since a firm’s profitability is associated with a degree of risk taking, risk indicators have been extensively treated as exogenous variables and affected firm performance. The level of risk taking should be determined through internal control quality and firm-specific characteristics to effectively understand the relationship between risk management and firm performance. This study aims to investigate the effects of risk management efficiency on the production efficiency of Chinese listed companies from 2002 to 2016 using the two-step data envelopment analysis (DEA) approach. Empirical results indicate that risk management differs from traditional financial theory, which means that high-level risk would earn high expected returns. Firms with a low efficiency index of enterprises risk management will have low performance. In particular, internal controls were significantly improved after the 2008 financial crisis. Our overall results also suggest that information asymmetry is still a problem in financial markets. To achieve maximum benefits for shareholders and improve the quality of information disclosure, methods for enacting market regulations are still very important issues in China.

Keywords: Risk management efficiency; data envelopment analysis; information asymmetry (search for similar items in EconPapers)
JEL-codes: C (search for similar items in EconPapers)
Date: 2020
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