Chief Risk Officers and Firm Value: Empirical Evidence From the Insurance Industry
40 Pages Posted: 20 Apr 2019
Date Written: March 18, 2019
We study the relationship between enterprise risk management and firm value. We analyze how the influence and reporting of the chief risk officer (CRO) and the incentives to compensate him or her contribute to firm value. We use U.S. publicly traded insurers data between 2009 and 2017 and find that the participation of a CRO is insufficient for value creation in insurers. Our results present a negative relationship between a CRO and firm value. However, we find empirical evidence of a positive relationship between firm value and the incentives related to the compensation of the CRO, specifically including the CRO in the compensation committee of the board and providing the CRO with an equity-based compensation plan.
Keywords: Enterprise risk management; Chief risk officer; Compensation; Firm value; Insurance industry
JEL Classification: G22; G32
Suggested Citation: Suggested Citation