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Does Enterprise Risk Management Increase Firm Value?

33 Pages Posted: 3 May 2011 Last revised: 16 Dec 2014

Michael K. McShane

Old Dominion University

Anil Nair

Old Dominion University - Strome College of Business

Elzotbek Rustambekov

Bryant University

Date Written: July 31, 2010

Abstract

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

Suggested Citation

McShane, Michael K. and Nair, Anil and Rustambekov, Elzotbek, Does Enterprise Risk Management Increase Firm Value? (July 31, 2010). McShane, M., Nair, A., and Rustambekov, E., 2011, Does Enterprise Risk Management Increase Firm Value? Journal of Accounting, Auditing, and Finance, 26: 641-658.. Available at SSRN: https://ssrn.com/abstract=1829027

Michael K. McShane (Contact Author)

Old Dominion University ( email )

Norfolk, VA 23529-0222
United States

Anil Nair

Old Dominion University - Strome College of Business ( email )

Norfolk, VA 23529
United States

Elzotbek Rustambekov

Bryant University ( email )

1150 Douglas Pike
Smithfield, RI 02917-1284
United States

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