The Characteristics of Firms That Hire Chief Risk Officers |
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| Authors: | Donald Pagach Richard Warr |
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| Institution: | Donald Pagach and Richard Warr are at the Jenkins Graduate School of Management, North Carolina State University. Donald Pagach can be contacted via e‐mail: don@ncsu.edu. |
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| Abstract: | We examine the characteristics of firms that adopt enterprise risk management (ERM) and find support for the hypothesis that firms adopt ERM for direct economic benefit rather than to merely comply with regulatory pressure. Using chief risk officer (CRO) hires as a proxy for ERM adoption we find that firms that are larger, more volatile, and have greater institutional ownership are more likely to adopt ERM. In addition, when the CEO has incentives to take risk, 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. |
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