Enterprise risk management and firm performance: Role of the risk committee

Malik, Muhammad Farhan; Zaman, Mahbub; Buckby, Sherrena

Abstract

In recent years, there have been increasing efforts in the corporate world to invest in risk management and governance processes. In this paper, we examine the impact of Enterprise Risk Management (ERM) on firm performance by examining whether firm performance is strengthened or weakened by the establishment of a board-level risk committee (BLRC), an important governance mechanism that oversees ERM processes. Based on 260 observations from FTSE350 listed firms in the UK during 2012–2015, we find the effectiveness of ERM significantly and positively affects firm performance. We also find strong BLRC governance complements this relationship and increases the firm performance effects of ERM. Our findings suggest the mere formation of a BLRC is not a panacea for ERM oversight; however, existence of a structurally strong BLRC is crucial for effective ERM governance.

Citation

Malik, M. F., Zaman, M., & Buckby, S. (2020). Enterprise risk management and firm performance: Role of the risk committee. Journal of Contemporary Accounting and Economics, 16(1), Article 100178. https://doi.org/10.1016/j.jcae.2019.100178

• Journal Article Type: Article
• Acceptance Date: Nov 25, 2019
• Online Publication Date: Dec 4, 2019
• Publication Date: 2020-04
• Deposit Date: Jan 30, 2020
• Publicly Available Date: Jun 5, 2021
• Journal: Journal of Contemporary Accounting and Economics
• Print ISSN: 1815-5669
• Publisher: Elsevier
• Peer Reviewed: Peer Reviewed
• Volume: 16
• Issue: 1
• Article Number: 100178
• DOI: https://doi.org/10.1016/j.jcae.2019.100178
• Keywords: Enterprise risk management; Risk committee; Risk governance; Firm performance
• Public URL: https://hull-repository.worktribe.com/output/3403225
• Additional Information: This article is maintained by: Elsevier; Article Title: Enterprise risk management and firm performance: Role of the risk committee; Journal Title: Journal of Contemporary Accounting & Economics; CrossRef DOI link to publisher maintained version: https://doi.org/10.1016/j.jcae.2019.100178; Content Type: article; Copyright: © 2019 Elsevier Ltd. All rights reserved.