ENTERPRISE RISK MANAGEMENT ON FIRM VALUE : EMPIRICAL STUDY ON MANUFACTURING SECTOR COMPANIES LISTED ON THE INDONESIA STOCK EXCHANGE

Dinarossi Utami, Sulastri Sulastri, Moh. Adam, Yuliani Yuliani

Abstract

Enterprise risk management (ERM) is being adopted by many firms globally and the value relevance of enterprise risk management is scarce. The purpose of this study was to determine the impact of enterprise risk management on firm value for companies on the Indonesia Stock Exchange. This study is conducted using a sample of manufacturing companies listed on the Indonesia Stock Exchange from 2012 to 2020. The findings indicate a significant correlation between enterprise risk management and firm value, indicating that enterprise risk management significantly contributes to firm value. These findings may be used to develop and shape enterprise risk management policy frameworks for firms and countries. The study provides new insights, from an Indonesian emerging market context on the value effects of enterprise risk management. Nonetheless, this study found that companies with larger and international samples may improve future studies.

Keywords: Corporate Risk, Enterprise risk management, Firm Value.

Full Text:

PDF

References

Aabo, T., Fraser, J.R.S., & Simkins, B. J. (2010). The Rise and Evolution of the Chief Risk Officer. Enterprise Risk Management: Today’s Leading Research and Best Practices for Tomorrow’s Executives, 9(3), 531–556.

Andersen, T. J. (2013). Corporate Risk Management and Value Creation. Montenegrin Journal of Economics, Volume 9(2), 17–27.

Beasley, M. B. (2010). Current State of Enterprise Risk Oversight and Market Perceptions of COSO’s ERM Framework, ERM Initiative at North Carolina State University,. In C. R. ERM. Raleigh.

Beasly MS, P. D. (2008). The information conveyed in hiring announcements of senior executives overseeing enterprise-wide risk management processes. Journal of Accounting, Auditing and Finance 23(3), 311-332.

Bender, R., & Ward, K. (2013). Corporate financial strategy (4th Edition).

COSO. (2004). Enterprise Risk Management – Integrated Framework. Jersey City.

Froot KA, S. D. (1993). Risk management: coordinating corporate investment and financing policies. . Journal of Finance 48, 1629-1658.

Gates, S., Nicolas, J.-L., & Walker, P. L. (2012). Enterprise Risk Management: A Process for Enhanced Management and Improved Performance. Management Accounting Quarterly, 13(3), 28–38. http://ezproxy.library.capella.edu/login?url=http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=78173163&site=ehost-live&scope=site

Hoyt, R. E. (2011). The Value of Enterprise Risk Management. Journal of Risk and Insurance, 78(4), 795-822.

Leavy, P. (2015). Method meets art: Arts-based research practice (2nd ed.). Guilford Press.

Shad, M. K., Lai, F. W., Fatt, C. L., Klemeš, J. J., & Bokhari, A. (2019). Integrating sustainability reporting into enterprise risk management and its relationship with business performance: A conceptual framework. Journal of Cleaner Production, 208, 415–425. https://doi.org/10.1016/j.jclepro.2018.10.120

Stulz, R. M. (1984). Optimal Hedging Policies. The Journal of Financial and Quantitative Analysis, 19(2), 127. https://doi.org/10.2307/2330894

TJ, A. (2009). Effective risk management: Exploring effects of innovation and capital. Journal of Strategy and Management 2(4), 352-379.

van Daelen, M., & Van der Elst, C. (2013). Risk Management and Corporate Governance. In Risk Management and Corporate Governance. https://doi.org/10.4337/9781849807999

Widarjono, A. (2018). Ekonometrika Pengantar Dan Aplikasinya Disertai Panduan Eviews. Edisi kelima. Yogyakarta: UPP STIM YKPN Yogyakarta.

Refbacks

  • There are currently no refbacks.