The Value of Enterprise Risk Management

28 Pages Posted: 24 Nov 2011

See all articles by Robert E. Hoyt

Robert E. Hoyt

University of Georgia - C. Herman and Mary Virginia Terry College of Business

Andre P. Liebenberg

University of Mississippi - School of Business Administration

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Date Written: December 2011

Abstract

Enterprise risk management (ERM) has been the topic of increased media attention in recent years. The objective of this study is to measure the extent to which specific firms have implemented ERM programs and, then, to assess the value implications of these programs. We focus our attention in this study on U.S. insurers in order to control for differences that might arise from regulatory and market differences across industries. We simultaneously model the determinants of ERM and the effect of ERM on firm value. We estimate the effect of ERM on Tobin's Q, a standard proxy for firm value. We find a positive relation between firm value and the use of ERM. The ERM premium of roughly 20 percent is statistically and economically significant.

Suggested Citation

Hoyt, Robert E. and Liebenberg, Andre P., The Value of Enterprise Risk Management (December 2011). Journal of Risk and Insurance, Vol. 78, Issue 4, pp. 795-822, 2011. Available at SSRN: https://ssrn.com/abstract=1964113 or http://dx.doi.org/10.1111/j.1539-6975.2011.01413.x

Robert E. Hoyt (Contact Author)

University of Georgia - C. Herman and Mary Virginia Terry College of Business ( email )

Athens, GA 30602-6255
United States
706-542-4290 (Phone)
706-542-4295 (Fax)

Andre P. Liebenberg

University of Mississippi - School of Business Administration ( email )

PO Box 3986
Oxford, MS 38677
United States

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