Enterprise risk management and economies of scale and scope: evidence from the German insurance industry

Muhammed Altuntas (), Thomas R. Berry-Stölzle () and J. David Cummins ()
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Muhammed Altuntas: University of Cologne
Thomas R. Berry-Stölzle: University of Iowa
J. David Cummins: Temple University

Annals of Operations Research, 2021, vol. 299, issue 1, No 34, 845 pages

Abstract: Abstract Enterprise risk management (ERM) is the approach of managing all risks faced by an enterprise in an integrated, holistic fashion. This research investigates whether the utilization of the ERM approach helps firms achieve economies of scale and scope. We use detailed survey data of German property-liability insurance companies that allows us to construct continuous measures of ERM quality. We find that ERM quality positively moderates the size-scale efficiency relationship, and we find that ERM positively moderates the diversification-revenue scope efficiency relationship, indicating that ERM facilitates economies of scale and economies of scope with respect to revenue complementarities. We do not find any evidence of economies of scope with respect to cost complementarities. Our results suggest that ERM’s impact on economies of scale and scope is one answer to the question of how ERM can create value.

Keywords: Enterprise risk management; Economies of scale; Economies of scope; Firm efficiency; Insurance industry (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (6)

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DOI: 10.1007/s10479-019-03393-x

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