The Effect of the Enterprise Risk Management Implementation on the Firm Value of European Companies

24 Pages Posted: 16 Sep 2013

See all articles by Giorgio Stefano Bertinetti

Giorgio Stefano Bertinetti

Ca Foscari University of Venice - Department of Management

Elisa Cavezzali

Ca Foscari University of Venice - Department of Management

Gloria Gardenal

Ca Foscari University of Venice - Department of Management

Multiple version iconThere are 2 versions of this paper

Date Written: July 2013

Abstract

We aim to investigate the impact of the adoption of an Enterprise Risk Management (ERM) system on the enterprise value and to discover which are the determinants of this choice. Several economic actors have decided to face the current economic and financial complexity shifting from a Traditional silo-based Risk Management approach (TRM) to a more comprehensive one, the so called Enterprise Risk Management (ERM). Some academics have tried to investigate the effects of the ERM implementation on firm value, mainly focusing on the financial industry. The results are still controversial. Moreover, there is no empirical evidence about the adoption of ERM programs among non-financial companies. The aim of our study is double: first, we try to understand if the ERM implementation affects firm value on a sample of 200 European companies, belonging to both financial and non-financial industries; second, we test which are the determinants of the adoption of an ERM system. We do this performing a fixed effects panel regression analysis (goal 1) and a fixed effects logistic analysis (goal 2). We find a positive statistically significant relation between the ERM adoption and firm value. As for the probability that a firm engages in an ERM protocol, we find that size, the company beta and profitability (ROA) are the statistically significant determinants.

Keywords: traditional risk management, enterprise risk management, industry, firm value

JEL Classification: G32, L22, L25

Suggested Citation

Bertinetti, Giorgio Stefano and Cavezzali, Elisa and Gardenal, Gloria, The Effect of the Enterprise Risk Management Implementation on the Firm Value of European Companies (July 2013). Department of Management, Università Ca' Foscari Venezia Working Paper No. 10/2013, Available at SSRN: https://ssrn.com/abstract=2326195 or http://dx.doi.org/10.2139/ssrn.2326195

Giorgio Stefano Bertinetti

Ca Foscari University of Venice - Department of Management ( email )

San Giobbe, Cannaregio 873
Venice, 30121
Italy

Elisa Cavezzali (Contact Author)

Ca Foscari University of Venice - Department of Management ( email )

San Giobbe, Cannaregio 873
Venice, 30121
Italy

Gloria Gardenal

Ca Foscari University of Venice - Department of Management ( email )

San Giobbe, Cannaregio 873
Venice, 30121
Italy

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