Does Enterprise Risk Management Increase Firm Value?
33 Pages Posted: 3 May 2011 Last revised: 16 Dec 2014
Date Written: July 31, 2010
Enterprise Risk Management (ERM) has emerged as a construct that ostensibly overcomes limitations of silo-based traditional risk management (TRM), yet little is known about its effectiveness. The scant research on the relationship between ERM and firm performance has offered mixed findings, and has been limited by the lack of a suitable proxy for the degree of ERM implementation. Using Standard and Poor’s (S&P) newly available risk management rating, we find evidence of a positive relation between increasing levels of TRM capability and firm value but no additional increase in value for firms achieving a higher ERM rating. Considering these results, we suggest directions for future research.
Keywords: enterprise risk management, insurance companies, insurers
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