High performance organization and enterprise risk management implementation

Research output: Contribution to journalArticle

Abstract

Enterprise risk management (ERM) manages risk in a holistic manner thus improves the traditional risk approach. Due to potential increase in overhead costs, only firms with strong financial performance could afford to implement ERM; which is still a debatable issue. This study examines the effect of high-performance organization (HPO) on ERM implementation using 435 public listed firms from 2001 to 2013. Logistic regression shows that HPO firm is most likely to implement ERM by more than 65 percent compared to the non-HPO firm, consistent with the positive association provided by subsample analysis. Thus, firms with high financial performance have the incentive to provide resources in absorbing the high cost of ERM. The results suggest the importance of HPO in the policy formulation for ERM implementation.

Original languageEnglish
Pages (from-to)347-368
Number of pages22
JournalInternational Journal of Business and Management Science
Volume8
Issue number2
Publication statusPublished - 1 Jan 2018

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High performance
Enterprise risk management
Financial performance
Logistic regression
Organizational performance
Incentives
Resources
Overhead costs
Costs

Keywords

  • Firm performance
  • Logistic regression
  • Organizational theory
  • Public listed firms
  • Risk management

ASJC Scopus subject areas

  • Business and International Management
  • Economics and Econometrics

Cite this

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abstract = "Enterprise risk management (ERM) manages risk in a holistic manner thus improves the traditional risk approach. Due to potential increase in overhead costs, only firms with strong financial performance could afford to implement ERM; which is still a debatable issue. This study examines the effect of high-performance organization (HPO) on ERM implementation using 435 public listed firms from 2001 to 2013. Logistic regression shows that HPO firm is most likely to implement ERM by more than 65 percent compared to the non-HPO firm, consistent with the positive association provided by subsample analysis. Thus, firms with high financial performance have the incentive to provide resources in absorbing the high cost of ERM. The results suggest the importance of HPO in the policy formulation for ERM implementation.",
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