The effect of enterprise risk management on firm value

Evidence from Malaysian technology firms

Research output: Contribution to journalReview article

1 Citation (Scopus)

Abstract

This paper aims to examine the relationship between ERM and firm value in Malaysia. In the past literature, ERM had been argued to increase firm value but empirical evidence shows mixed and inconclusive results. Using sample from 2004 to 2012, this paper furthers the analysis on the relationship between ERM and firm performance among technology firms in Malaysia. Indeed, technology industry is the fastest growing and a volatile industry, which requires continuous innovation. These make technology firms more prone to risk exposure. In analyzing this issue, dynamic panel data is employed to allow cross-sectional and time series analysis. Our results show that the implementation of ERM in the previous year has strong negative relationship with firm value at 1 percent significance level. It supports the argument that the effect of ERM is not immediately realized as well as entails high implementation cost. The findings provide useful input and insight in formulating new policy in relation to corporate governance, particularly ERM in Malaysia.

Original languageEnglish
JournalJurnal Pengurusan
Volume49
Publication statusPublished - 1 Jun 2017

Fingerprint

Firm value
Malaysia
Enterprise risk management
Industry
Corporate governance
Continuous innovation
Time series analysis
Costs
Dynamic panel data
Risk exposure
Firm performance
Empirical evidence

Keywords

  • Enterprise risk management
  • ERM
  • Firm performance
  • Firm value
  • Risk management

ASJC Scopus subject areas

  • Business and International Management
  • Accounting
  • Business, Management and Accounting (miscellaneous)

Cite this

@article{54c586254eca47da8ed53418646528d6,
title = "The effect of enterprise risk management on firm value: Evidence from Malaysian technology firms",
abstract = "This paper aims to examine the relationship between ERM and firm value in Malaysia. In the past literature, ERM had been argued to increase firm value but empirical evidence shows mixed and inconclusive results. Using sample from 2004 to 2012, this paper furthers the analysis on the relationship between ERM and firm performance among technology firms in Malaysia. Indeed, technology industry is the fastest growing and a volatile industry, which requires continuous innovation. These make technology firms more prone to risk exposure. In analyzing this issue, dynamic panel data is employed to allow cross-sectional and time series analysis. Our results show that the implementation of ERM in the previous year has strong negative relationship with firm value at 1 percent significance level. It supports the argument that the effect of ERM is not immediately realized as well as entails high implementation cost. The findings provide useful input and insight in formulating new policy in relation to corporate governance, particularly ERM in Malaysia.",
keywords = "Enterprise risk management, ERM, Firm performance, Firm value, Risk management",
author = "{Bangaan Abdullah}, {Mohd Hafizuddin Syah} and Hawati Janor and Hamid, {Mohamad Abdul} and Puan Yatim",
year = "2017",
month = "6",
day = "1",
language = "English",
volume = "49",
journal = "Jurnal Pengurusan",
issn = "0127-2713",
publisher = "Penerbit Universiti Kebangsaan Malaysia",

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TY - JOUR

T1 - The effect of enterprise risk management on firm value

T2 - Evidence from Malaysian technology firms

AU - Bangaan Abdullah, Mohd Hafizuddin Syah

AU - Janor, Hawati

AU - Hamid, Mohamad Abdul

AU - Yatim, Puan

PY - 2017/6/1

Y1 - 2017/6/1

N2 - This paper aims to examine the relationship between ERM and firm value in Malaysia. In the past literature, ERM had been argued to increase firm value but empirical evidence shows mixed and inconclusive results. Using sample from 2004 to 2012, this paper furthers the analysis on the relationship between ERM and firm performance among technology firms in Malaysia. Indeed, technology industry is the fastest growing and a volatile industry, which requires continuous innovation. These make technology firms more prone to risk exposure. In analyzing this issue, dynamic panel data is employed to allow cross-sectional and time series analysis. Our results show that the implementation of ERM in the previous year has strong negative relationship with firm value at 1 percent significance level. It supports the argument that the effect of ERM is not immediately realized as well as entails high implementation cost. The findings provide useful input and insight in formulating new policy in relation to corporate governance, particularly ERM in Malaysia.

AB - This paper aims to examine the relationship between ERM and firm value in Malaysia. In the past literature, ERM had been argued to increase firm value but empirical evidence shows mixed and inconclusive results. Using sample from 2004 to 2012, this paper furthers the analysis on the relationship between ERM and firm performance among technology firms in Malaysia. Indeed, technology industry is the fastest growing and a volatile industry, which requires continuous innovation. These make technology firms more prone to risk exposure. In analyzing this issue, dynamic panel data is employed to allow cross-sectional and time series analysis. Our results show that the implementation of ERM in the previous year has strong negative relationship with firm value at 1 percent significance level. It supports the argument that the effect of ERM is not immediately realized as well as entails high implementation cost. The findings provide useful input and insight in formulating new policy in relation to corporate governance, particularly ERM in Malaysia.

KW - Enterprise risk management

KW - ERM

KW - Firm performance

KW - Firm value

KW - Risk management

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