Does Enterprise Risk Management Create Value for Firms?: Evidence from Nordic countries

N. Sekerci

    Research output: Chapter in Book/Report/Conference proceedingChapterAcademicpeer-review

    Abstract

    Risk management has become more important due to the recent financial crisis. Firms invest significant amounts of money in implementing enterprise-wide (integrated) risk management programs. However, it is questionable if these programs really do pay off for them. Despite increased attention on Enterprise Risk Management (ERM) and its wide usage, we know very little about if ERM is value adding to firms. This paper provides evidence on the value-relevance of ERM by investigating the impact of ERM adoption on firm valuation. It advances prior studies by introducing a superior ERM measurement. ERM is measured by using a unique dataset which is constructed by a survey conducted on how listed
    Nordic firms organize their risk management. Our ERM measure is calculated from the survey responses, and we are able to introduce more dimensions into ERM – thanks to valuable inside information on firms’ risk management programs, most of which otherwise would not be obtainable through publicly available information – enabling us to capture the complexity of ERM. The main finding of the paper is that value creation of ERM is not supported after controlling for other determinants of firm value and endogeneity bias. The
    findings are highly consistent over different specifications.
    Original languageEnglish
    Title of host publicationThe Routledge Companion to Strategic Risk Management
    EditorsTorben Juul Andersen
    PublisherRoutledge
    Number of pages43
    ISBN (Electronic)9781315780931
    ISBN (Print)978-1138016514
    Publication statusPublished - 2015

    Publication series

    NameRoutledge Companions in Business, Management and Accounting

    Keywords

    • Enterprise Risk Management
    • ERM
    • firm value
    • endogeneity
    • instrumental

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