IDEAS home Printed from https://ideas.repec.org/a/gam/jjrfmx/v15y2022i2p83-d751514.html
   My bibliography  Save this article

The Impact of Foreign Capital on the Level of ERM Implementation in Czech SMEs

Author

Listed:
  • Lenka Syrová

    (Department of Strategy, Faculty of Business Administration, Prague University of Economics and Business, W. Churchill Sq 4, 13067 Prague, Czech Republic)

  • Jindřich Špička

    (Department of Strategy, Faculty of Business Administration, Prague University of Economics and Business, W. Churchill Sq 4, 13067 Prague, Czech Republic)

Abstract

The COVID-19 pandemic has had a devastating impact on many small and medium-sized businesses around the world. Enterprise risk management (ERM) is a conceptual framework that encompasses the systematic and comprehensive identification, analysis, and management of risks in an enterprise. In the post-communist countries of Central Europe, the level of ERM is still relatively low, especially in small and medium-sized enterprises (SMEs). This study fills a gap in the existing knowledge on ERM by shedding light on the influence of foreign capital on the level of ERM implementation in Czech SMEs. The aim of the study is to assess the influence of the share of foreign capital in Czech SMEs on the level of ERM implementation. A validated self-report of 296 non-financial SMEs in the Czech Republic was analyzed using latent class analysis (LCA) and multiple linear regression. The results of the study contribute to the literature by enriching the empirical analysis of ERM in emerging markets. The originality of the results lies in the identification of three distinct groups of firms according to the combination of implemented ERM elements—“no ERM”, “best practice ERM”, and “pretended ERM”—and the finding that the share of foreign capital, age, and firm size influence the level of ERM implementation. In particular, the positive influence of foreign capital in younger companies makes it possible to overcome the barrier of traditionalist thinking of old-school Czech managers influenced by the period of economic transition in post-communist countries. The paper builds on the existing evidence with new empirical conclusions and argues for a greater inflow of foreign direct investment into emerging markets.

Suggested Citation

  • Lenka Syrová & Jindřich Špička, 2022. "The Impact of Foreign Capital on the Level of ERM Implementation in Czech SMEs," JRFM, MDPI, vol. 15(2), pages 1-17, February.
  • Handle: RePEc:gam:jjrfmx:v:15:y:2022:i:2:p:83-:d:751514
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/1911-8074/15/2/83/pdf
    Download Restriction: no

    File URL: https://www.mdpi.com/1911-8074/15/2/83/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Don Pagach & Monika Wieczorek-Kosmala, 2020. "The Challenges and Opportunities for ERM Post-COVID-19: Agendas for Future Research," JRFM, MDPI, vol. 13(12), pages 1-10, December.
    2. André P. Liebenberg & Robert E. Hoyt, 2003. "The Determinants of Enterprise Risk Management: Evidence From the Appointment of Chief Risk Officers," Risk Management and Insurance Review, American Risk and Insurance Association, vol. 6(1), pages 37-52, February.
    3. Sana Masmoudi Mardessi & Sonda Daoud Ben Arab, 2018. "Determinants of ERM implementation: the case of Tunisian companies," Journal of Financial Reporting and Accounting, Emerald Group Publishing Limited, vol. 16(3), pages 443-463, September.
    4. Veland Ramadani & Hyrije Abazi-Alili & Léo-Paul Dana & Gadaf Rexhepi & Sadudin Ibraimi, 2017. "The impact of knowledge spillovers and innovation on firm-performance: findings from the Balkans countries," International Entrepreneurship and Management Journal, Springer, vol. 13(1), pages 299-325, March.
    5. Jonek-Kowalska, Izabela, 2019. "Efficiency of Enterprise Risk Management (ERM) systems. Comparative analysis in the fuel sector and energy sector on the basis of Central-European companies listed on the Warsaw Stock Exchange," Resources Policy, Elsevier, vol. 62(C), pages 405-415.
    6. Martina Musteen & Deepak K. Datta & Marcus M. Butts, 2014. "Do International Networks and Foreign Market Knowledge Facilitate SME Internationalization? Evidence from the Czech Republic," Entrepreneurship Theory and Practice, , vol. 38(4), pages 749-774, July.
    7. Mojmir Hampl & Tomas Havranek & Zuzana Irsova, 2020. "Foreign capital and domestic productivity in the Czech Republic: a meta-regression analysis," Applied Economics, Taylor & Francis Journals, vol. 52(18), pages 1949-1958, April.
    8. Vlad Tarko, 2020. "Understanding post-communist transitions: the relevance of Austrian economics," The Review of Austrian Economics, Springer;Society for the Development of Austrian Economics, vol. 33(1), pages 163-186, March.
    9. Mazurina Mohd Ali & Nur Shazwani Ab Hamid & Erlane K Ghani, 2019. "Examining the Relationship Between Enterprise Risk Management and Firm Performance in Malaysia," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 10(3), pages 239-251, May.
    10. Nguyen, Duc Khuong & Vo, Dinh-Tri, 2020. "Enterprise risk management and solvency: The case of the listed EU insurers," Journal of Business Research, Elsevier, vol. 113(C), pages 360-369.
    11. Al-Amri, Khalid & Davydov, Yevgeniy, 2016. "Testing the effectiveness of ERM: Evidence from operational losses," Journal of Economics and Business, Elsevier, vol. 87(C), pages 70-82.
    12. Mirna Jabbour & Magdy Abdel-Kader, 2016. "ERM adoption in the insurance sector," Qualitative Research in Accounting & Management, Emerald Group Publishing Limited, vol. 13(4), pages 472-510, October.
    13. Lisa K. Meulbroek, 2002. "A Senior Manager'S Guide To Integrated Risk Management," Journal of Applied Corporate Finance, Morgan Stanley, vol. 14(4), pages 56-70, January.
    14. Judit Oláh & Zuzana Virglerova & József Popp & Jana Kliestikova & Sándor Kovács, 2019. "The Assessment of Non-Financial Risk Sources of SMES in the V4 Countries and Serbia," Sustainability, MDPI, vol. 11(17), pages 1-19, September.
    15. Philipp Lechner & Nadine Gatzert, 2018. "Determinants and value of enterprise risk management: empirical evidence from Germany," The European Journal of Finance, Taylor & Francis Journals, vol. 24(10), pages 867-887, July.
    16. Pérez-Cornejo, Clara & de Quevedo-Puente, Esther & Delgado-García, Juan Bautista, 2019. "How to manage corporate reputation? The effect of enterprise risk management systems and audit committees on corporate reputation," European Management Journal, Elsevier, vol. 37(4), pages 505-515.
    17. Gorzeń-Mitka Iwona, 2016. "Leading Risk Management Determinants of Small and Medium-Sized Enterprises (SMEs): An Exploratory Study in Poland," Eurasian Studies in Business and Economics, in: Mehmet Huseyin Bilgin & Hakan Danis (ed.), Entrepreneurship, Business and Economics - Vol. 1, edition 1, pages 289-298, Springer.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Gajdosikova Dominika & Valaskova Katarina, 2022. "The Impact of Firm Size on Corporate Indebtedness: A Case Study of Slovak Enterprises," Folia Oeconomica Stetinensia, Sciendo, vol. 22(1), pages 63-84, June.
    2. Dominika Gajdosikova & Katarina Valaskova & Tomas Kliestik & Maria Kovacova, 2023. "Research on Corporate Indebtedness Determinants: A Case Study of Visegrad Group Countries," Mathematics, MDPI, vol. 11(2), pages 1-30, January.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Sorin Gabriel Anton & Anca Elena Afloarei Nucu, 2020. "Enterprise Risk Management: A Literature Review and Agenda for Future Research," JRFM, MDPI, vol. 13(11), pages 1-22, November.
    2. Lenka Syrová & Jindřich Špička, 2023. "Exploring the indirect links between enterprise risk management and the financial performance of SMEs," Risk Management, Palgrave Macmillan, vol. 25(1), pages 1-27, March.
    3. Ivana Dvorski Lacković & Nataša Kurnoga & Danijela Miloš Sprčić, 2022. "Three-factor model of Enterprise Risk Management implementation: exploratory study of non-financial companies," Risk Management, Palgrave Macmillan, vol. 24(2), pages 101-122, June.
    4. Nadine Gatzert & Madeline Schubert, 2022. "Cyber risk management in the US banking and insurance industry: A textual and empirical analysis of determinants and value," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 89(3), pages 725-763, September.
    5. José Ruiz-Canela López, 2021. "How Can Enterprise Risk Management Help in Evaluating the Operational Risks for a Telecommunications Company?," JRFM, MDPI, vol. 14(3), pages 1-26, March.
    6. Malik, Muhammad Farhan & Zaman, Mahbub & Buckby, Sherrena, 2020. "Enterprise risk management and firm performance: Role of the risk committee," Journal of Contemporary Accounting and Economics, Elsevier, vol. 16(1).
    7. Heidinger, Dinah & Gatzert, Nadine, 2018. "Awareness, determinants and value of reputation risk management: Empirical evidence from the banking and insurance industry," Journal of Banking & Finance, Elsevier, vol. 91(C), pages 106-118.
    8. Enny Nurdin Sutan Maruhun & Wan Razazila Wan Abdullah & Ruhaya Atan & Sharifah Norzehan Syed Yusuf, 2018. "The Effects of Corporate Governance on Enterprise Risk Management: Evidence from Malaysian Shariah-Compliant Firms," International Journal of Academic Research in Business and Social Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Business and Social Sciences, vol. 8(1), pages 865-877, January.
    9. Chien-Ming Huang & Wei Yang & Ren-Qing Zeng, 2020. "Analysis on the Efficiency of Risk Management in the Chinese Listed Companies," Mathematics, MDPI, vol. 8(10), pages 1-13, October.
    10. Nguyen, Duc Khuong & Vo, Dinh-Tri, 2020. "Enterprise risk management and solvency: The case of the listed EU insurers," Journal of Business Research, Elsevier, vol. 113(C), pages 360-369.
    11. Zhu, Delong & Li, Zhe & Mishra, Arunodaya Raj, 2023. "Evaluation of the critical success factors of dynamic enterprise risk management in manufacturing SMEs using an integrated fuzzy decision-making model," Technological Forecasting and Social Change, Elsevier, vol. 186(PA).
    12. Wieczorek-Kosmala, Monika, 2014. "Risk management practices from risk maturity models perspective," Journal of East European Management Studies, Nomos Verlagsgesellschaft mbH & Co. KG, vol. 19(2), pages 133-159.
    13. Müzeyyen Çiğdem Akbaş, 2024. "Measuring the impact of enterprise risk management on performance, value, and risk indicators of Borsa Istanbul XBANK companies with data mining prediction models," Palgrave Communications, Palgrave Macmillan, vol. 11(1), pages 1-19, December.
    14. Hussein Alkhyyoon & Mohammad Reza Abbaszadeh & Farzaneh Nassir Zadeh, 2023. "Organizational Risk Management and Performance from the Perspective of Fraud: A Comparative Study in Iraq, Iran, and Saudi Arabia," JRFM, MDPI, vol. 16(3), pages 1-27, March.
    15. Sylvester Senyo Horvey & Jones Odei-Mensah, 2024. "Enterprise risk management and performance of the South African insurers: the moderating role of corporate governance," Risk Management, Palgrave Macmillan, vol. 26(4), pages 1-28, December.
    16. Rami Shaheen & Mehmet Ağa & Husam Rjoub & Ahmad Abualrub, 2020. "Investigation of the Pillars of Sustainability Risk Management as an Extension of Enterprise Risk Management on Palestinian Insurance Firms’ Profitability," Sustainability, MDPI, vol. 12(11), pages 1-20, June.
    17. Wang, Teng-Shih & Lin, Yi-Mien & Werner, Edward M. & Chang, Hsihui, 2018. "The relationship between external financing activities and earnings management: Evidence from enterprise risk management," International Review of Economics & Finance, Elsevier, vol. 58(C), pages 312-329.
    18. Marina Dabić & Jane Maley & Leo-Paul Dana & Ivan Novak & Massimiliano M. Pellegrini & Andrea Caputo, 2020. "Pathways of SME internationalization: a bibliometric and systematic review," Small Business Economics, Springer, vol. 55(3), pages 705-725, October.
    19. Alhassan Abdul-Wakeel Karakara & Evans Osabuohien, 2020. "ICT adoption, competition and innovation of informal firms in West Africa: a comparative study of Ghana and Nigeria," Journal of Enterprising Communities: People and Places in the Global Economy, Emerald Group Publishing Limited, vol. 14(3), pages 397-414, June.
    20. Kingsley Alawattegama, 2017. "The Impact of Enterprise Risk Management on Firm Performance: Evidence from Sri Lankan Banking and Finance Industry," International Journal of Business and Management, Canadian Center of Science and Education, vol. 13(1), pages 225-225, December.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:gam:jjrfmx:v:15:y:2022:i:2:p:83-:d:751514. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: MDPI Indexing Manager (email available below). General contact details of provider: https://www.mdpi.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.