The Characteristics of Firms that Hire Chief Risk Officers

38 Pages Posted: 4 Sep 2007 Last revised: 16 Apr 2010

Donald P. Pagach

North Carolina State University

Richard S. Warr

North Carolina State University

Multiple version iconThere are 2 versions of this paper

Date Written: April 10, 2010

Abstract

Enterprise risk management (ERM) is a management approach that holistically manages risks across the organization. In this paper we examine the characteristics of firms that adopt ERM. Our results support the hypothesis that firms adopt ERM for direct economic benefit rather than to merely comply with regulatory pressure. Using the hiring of a CRO as a proxy for ERM adoption, we find that firms that are larger, have more volatile operating cash flows, and greater institutional ownership are more likely to initiate an ERM program. In addition, when the CEO has incentives to take risk (through compensation), the firm is also more likely to hire a CRO. Finally, banks with lower levels of Tier 1 capital are also more likely to hire a CRO.

Keywords: Enterprise Risk Management

JEL Classification: G20, J33

Suggested Citation

Pagach, Donald P. and Warr, Richard S., The Characteristics of Firms that Hire Chief Risk Officers (April 10, 2010). Available at SSRN: https://ssrn.com/abstract=1010200 or http://dx.doi.org/10.2139/ssrn.1010200

Donald P. Pagach

North Carolina State University ( email )

Raleigh, NC 27695-8113
United States
919-515-4447 (Phone)
919-515-4446 (Fax)

Richard S. Warr (Contact Author)

North Carolina State University ( email )

BOX 7229
Raleigh, NC 27695-7229
United States
919-513-4646 (Phone)
919-515-6943 (Fax)

HOME PAGE: http://www4.ncsu.edu/~rswarr/

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