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Does Enterprise risk management enhance operating performance?

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  • Callahan, Carolyn
  • Soileau, Jared

Abstract

The Committee of Sponsoring Organizations (COSO) Enterprise Risk Management (ERM) framework (COSO-ERM) indicates that the development of an enterprise-wide risk assessment and management process is designed to “provide reasonable assurance regarding the achievement of entity objectives.” We examine this issue and hypothesize that firms with mature ERM processes should achieve greater operational performance than those with less mature risk management processes. This study relies on internal audit function management survey responses matched with archival firm level data to gain a better understanding of the expected operating performance impact of the multi-stage ERM implementation process. After controlling for board governance and other known effects, we find that firms with higher levels of ERM process maturity are characterized by higher operating performance than their industry peers utilizing performance metrics closely related to the earnings process. Our study provides support for the linkage of enhanced operating performance associated with the maturity of ERM processes and suggests other potential areas of ERM research.

Suggested Citation

  • Callahan, Carolyn & Soileau, Jared, 2017. "Does Enterprise risk management enhance operating performance?," Advances in accounting, Elsevier, vol. 37(C), pages 122-139.
    • Handle: RePEc:eee:advacc:v:37:y:2017:i:c:p:122-139
    DOI: 10.1016/j.adiac.2017.01.001
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    More about this item

    Keywords

    Enterprise risk management; Operating performance; Corporate governance;
    All these keywords.

    JEL classification:

    • M40 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - General
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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