Enterprise risk management and firm performance: The Italian case |
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| Institution: | 1. Department of Business Administration, University of Verona, Via Cantarane 24, 37129 Verona, Italy;2. School of Accounting, RMIT University, 445 Swanston Street, Melbourne VIC 3000, Australia;1. Research Institute for Economics and Business Administration, Kobe University, Japan;2. Faculty of Business Administration, Momoyama Gukuin University, Japan;3. Graduate School of Business Administration, Kobe University, Japan;1. Singapore Institute of Technology, 10 Dover Drive, Singapore 138683, Singapore;2. Aston Business School, Aston University, Aston Express Way, Birmingham B4 7ET, United Kingdom;3. Manchester Business School, University of Manchester, Oxford Rd, Manchester M13 9PL, United Kingdom;4. School of Accountancy, Singapore Management University, 60 Stamford Road, Singapore 178900, Singapore;1. School of Accountancy, Universiti Utara Malaysia, 06010 UUM Sintok, Kedah, Malaysia;2. Department of Accounting, Finance and Economics, Griffith University, Queensland 4111, Australia;3. School of Business, Charles Darwin University, Northern Territory 0909, Australia;1. International Business School, Universiti Teknologi Malaysia, Kuala Lumpur, Malaysia;2. Curtin University, Perth, Australia |
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| Abstract: | This paper investigates whether a relationship exists between the extent of implementation of enterprise risk management (ERM) systems and the performance of Italian listed companies. While many contributions in the literature focus on the determinants of ERM adoption and use one-dimensional feature to proxy for ERM implementation, we detect the consequences of ERM implementation and capture a variety of features to measure the sophistication of the ERM system. The results show that firms with advanced levels of ERM implementation present higher performance, both as financial performance and market evaluation. Additional tests also corroborate the expectation that effective ERM systems lead to higher performance by reducing risk exposure and that reverse causality between ERM and performance is not present in the short term. The study provides a twofold contribution to the ERM literature. First, it introduces new and more complete measures for ERM implementation, concerning not only corporate governance bodies dedicated to risk management, but also the characteristics of the risk assessment process. Moreover, it provides evidence of a positive relationship between ERM implementation and firm performance in an under-investigated context such as Italy. |
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| Keywords: | Enterprise risk management Chief risk officer Risk committee Risk assessment Performance Italy |
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