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The effect of the enterprise risk management implementation on the firm value of European companies

Giorgio Stefano Bertinetti (), Elisa Cavezzali () and Gloria Gardenal ()
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Giorgio Stefano Bertinetti: Università Ca' Foscari Venice
Elisa Cavezzali: Università Ca' Foscari Venice

No 10, Working Papers from Department of Management, Università Ca' Foscari Venezia

Abstract: We aim to investigate the impact of the adoption of an Enterprise Risk Management (ERM) system on the enterprise value and to discover which are the determinants of this choice. Several economic actors have decided to face the current economic and financial complexity shifting from a Traditional silo-based Risk Management approach (TRM) to a more comprehensive one, the so called Enterprise Risk Management (ERM). Some academics have tried to investigate the effects of the ERM implementation on firm value, mainly focusing on the financial industry. The results are still controversial. Moreover, there is no empirical evidence about the adoption of ERM programs among non-financial companies. The aim of our study is double: first, we try to understand if the ERM implementation affects firm value on a sample of 200 European companies, belonging to both financial and non-financial industries; second, we test which are the determinants of the adoption of an ERM system. We do this performing a fixed effects panel regression analysis (goal 1) and a fixed effects logistic analysis (goal 2). We find a positive statistically significant relation between the ERM adoption and firm value. As for the probability that a firm engages in an ERM protocol, we find that size, the company beta and profitability (ROA) are the statistically significant determinants.

Keywords: traditional risk management; enterprise risk management; industry; firm val (search for similar items in EconPapers)
JEL-codes: G32 L22 L25 (search for similar items in EconPapers)
Pages: 24 pages
Date: 2013-08
New Economics Papers: this item is included in nep-bec, nep-cfn, nep-rmg and nep-sbm
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