The Effect of Enterprise Risk Management Implementation on the Value of Companies Listed in the Nairobi Stock Exchange

40 Pages Posted: 9 Aug 2011

See all articles by Nelson Waweru

Nelson Waweru

York University - School of Administrative Studies

Eric Simiyu Kisaka

PwC - Kenya

Date Written: August 9, 2011

Abstract

This study assesses the level of implementation of Enterprise Risk Management (ERM) in companies listed in the Nairobi Stock Exchange. The study also seeks to test the significance of factors affecting this level of ERM implementation and to investigate whether the level of ERM implementation has a positive effect to the value of companies as measured by Tobin’s Q. Data was collected from a sample of 22 companies listed on the Nairobi Stock Exchange (NSE) for the periods ended December 2009. The research findings show that most of the organizations sampled viewed ERM implementation as a strategic business initiative as compared to a compliance requirement. The study also finds that there is a significant relationship between the appointment of a Chief Risk Officer and the level of Enterprise Risk Management Implementation in companies. However, it does not find a significant relationship between the level of ERM implementation and the following variables; industry of operation, level of board independence, size of the firm, and growth rate of the firm. Consistent with prior research, this study also found a significant relationship between a company’s level or Enterprise Risk Management implementation and the company’s value. The results of this study show that an increase in the level of ERM implementation in companies had a positive contribution to the value of the companies.

Keywords: Enterprise Risk Management, Company Value, Tobin’s Q, Nairobi Stock Exchange

JEL Classification: M40, M49

Suggested Citation

Waweru, Nelson Maina and Kisaka, Eric Simiyu, The Effect of Enterprise Risk Management Implementation on the Value of Companies Listed in the Nairobi Stock Exchange (August 9, 2011). AAA 2012 Management Accounting Section (MAS) Meeting Paper, Available at SSRN: https://ssrn.com/abstract=1907248 or http://dx.doi.org/10.2139/ssrn.1907248

Nelson Maina Waweru (Contact Author)

York University - School of Administrative Studies ( email )

4700 Keele St.
Toronto, Ontario M3J1P3
Canada
+14167362100 (Phone)
+14167365963 (Fax)

Eric Simiyu Kisaka

PwC - Kenya ( email )

Nairobi, Nairobi 00100
Kenya
0722390057 (Phone)

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